Selling your Business: Corporate Finance Advisor vs BrokerFriday, 26th January 2024
Selling your business is typically a “once in a lifetime” event for many business owners.
Therefore, choosing to work with a high-quality, trusted advisor with a proven track record of delivering successful outcomes and maximising shareholder value, is a hugely important decision.
Typically, the advisor of choice will either be a Corporate Finance Advisor or a Business Broker.
Many business owners will be familiar with the term “Broker” but are unclear on how the role of a Corporate Finance Advisor differs, and how they can add value when selling your business.
What is the role of a Broker?
As you might expect, their role is to broker a deal between buyer and seller.
Once instructed, a Broker will typically prepare a brief sales document, containing headline commercial and financial information on the business, before sharing this information far and wide, approaching many potential interested parties. Think of an estate agent, but for businesses not properties.
If a buyer is identified, they will assist in the initial deal negotiations, but then often leave their client to navigate the due diligence process, and negotiate the finer details of the deal, directly with the buyer. Whilst there is a place for brokers to support smaller simpler transactions, this approach does not work for everyone – this is where instructing a Corporate Finance Advisor can really help.
What is the role of a Corporate Finance Advisor?
Corporate Finance Advisors are often called “Lead Advisors” because they do just that; take a lead on the entire transaction, from the very beginning to the very end.
Like a Broker, they will prepare the sales documentation, but take greater time to understand the business, the sector, and crucially, the value drivers which will maximise the transaction price and structure.
Unlike Brokers, Corporate Finance Advisors will undertake a more much targeted approach to finding a potential buyer; mapping the market and identifying the most likely strategic buyers, focusing on those willing to pay a premium to acquire your business. Approaching a smaller number of parties also reduces the risk of the confidential transaction becoming known to employees, customers and suppliers, which can create commercial difficulties for the business.
Once a buyer is found and a deal agreed, a Corporate Finance Advisor would continue to ‘lead’ the process and remain heavily engaged, working with your other advisors as required (e.g. lawyers and tax advisors) to coordinate responses and lead on all negotiations.
Transactions are inherently complex in nature, and not all deal terms can be agreed at the outset. As the buyer finds out more about the target business through their due diligence process, this can cause previously agreed terms to be renegotiated, or new issues to be negotiated. This includes financial considerations, such as deal value and structure, but also extends to non-financial considerations, such as how long the sellers will need to remain in the business post-transaction.
A Corporate Finance Advisors role is to manage the process from initial appointment, right through to a successful conclusion of the transaction.
Summary of Brokers vs Corporate Finance Advisors
|Corporate Finance Advisor
|Proactive approach to sales documentation,
to enhance value drivers
|Heavy investment of time to identify the right ‘strategic’ buyer
|Deep knowledge of sector KPI’s ensuring
a focus ‘data-ready’ process
|High quality buyer discussion creating competitive tensions
|Closely policed communications to reduce
|Project manage transaction throughout the process
|Fully integrated transaction process combining Corporate Finance,
Tax and Commercial advice
How can MHA help?
At MHA Corporate Finance, we act as Corporate Finance Advisors. Our way of working is to ‘lead’ the transaction, being on the front foot to not only negotiate a good transaction structure but also to ensure the transaction is ‘driven’ forward to a successful conclusion.
In essence, we take ownership of the transaction from the outset, doing what is required to get from the start to successful completion and coordinating other parties along the way.