The simplest way to look at the difference between a business broker and an M&A Advisor is that, while they are both involved in facilitating the sale of businesses, Business Brokers operate on a smaller scale and transactions usually involve single stand-alone businesses. M&A Advisors work on a larger scale and transactions may involve complex business mergers or sales spanning multiple locations. The deal size that a Business Broker works with usually ranges up to $1 -4 million, whereas M&A Advisors work on deals in the $5-50 million range, although these numbers can have some overlap.
Client Profiles
As a result of this difference in scale, Business Brokers and M&A Advisors tend to have different client profiles. Usually, small firms and individuals (including entrepreneurs) will fit the client profile for Business Brokers. M&A Advisors cater to the needs of large organizations and firms, or even governments and individual entrepreneurs for large scale projects, spanning multiple regions.
Valuation Methods
The skill sets necessary to evaluate the value of a business are also different. Business Brokers offer services centered around establishments which are relatively simple to evaluate, while M&A Advisors offer services around complex business transactions which may be more difficult. The valuation methods used by Business Brokers are confined to current sales, location, and profit numbers. An M&A Advisor’s valuation methods are elaborate enough to include strategic potential targets, analysis of required investments, intellectual asset valuation, and future potential growth.
Scope of Business Targets
The size and nature of a business also dictates the targeting of suitors for the sale. Therefore, the Business Broker’s assistance can be limited in scope. A client will generally be presented with a list of available sellers or buyers within the regional reach of the Broker. M&A Advisors work strategically with the client, and the search can involve a national, or even international search for appropriate targets.
Compensation
The manner in which both are compensated also differ to a certain degree. Business Brokers work on a commission of the deal value (usually a pre-decided percentage). M&A Advisors also work on percentage payouts, but additionally often get rewards for their specific engagement efforts and additional services arranged for. The difference in value is a result of the scope of long-term commitment. The role of a Business Broker is limited to the point of a deal getting done, whereas an M&A Advisor may work in continued engagements for an extended period of time for the successful implementation of the venture.
The Bottom Line
Selling, buying, or merging a business can make or break your business venture. Selecting the right company for your needs requires a thorough evaluation, and it often gets confusing to select between Business Brokers and M&A Advisors. M&A Advisors do offer more comprehensive services but come at an additional cost. Business Brokers can be an economical option but are limited in scope and service. Considering the above-mentioned points, the right fit for your business should be selected. Skylight Intermediaries has both Business Brokers and M&A Advisors on staff, so we can meet your needs no matter what your business requires.
