Tuesday, June 8, 2010

What Business Brokers Do

What Business Brokers Do

Business owners thinking of selling their companies are sometimes curious about the services provided by a business broker, intermediary, or investment banker. Regardless of the title, this business selling professional brings an array of skills to the table that are key to the success of selling a company. The job encompasses a number of activities.


The first involves preparation and packaging. He needs to learn about your personal goals, then collect and analyze data about your business.

He'll delve into areas such as...
- company history
- finances
- human resources
- operations
- inventory management
- research and development
- buildings and equipment
- sales and marketing
- public relations
- and customer service

Information on these topics is used to write up a confidential selling memorandum. This document typically includes several pages of narrative, along with financial statements. It is used to present data about your company to qualified buyers.

Number 2: Your broker helps in structuring your deal's price and terms.

This involves re-casting financial statements to show the true performance and full economic value of your business. The process adjusts your assets to their fair market value and adds back discretionary expenses.

A thorough business valuation is then conducted by a third party professional to determine your companyĆ¢€™s fair market value. With the valuation in hand, your broker recommends pricing, terms and deal structure, based on industry norms. By the way, this third-party valuation is also used to confirm and justify the asking price to buyers and to their lenders.

Number 3: Your intermediary will match your companyĆ¢€™s criteria to databases of active, qualified buyers.

Number 4: He will pursue other marketing activities to generate additional interest from prospective buyers.

Fifth, your broker interviews and qualifies all prospective buyers. He does this to ensure that they have the necessary management skills and financial resources to make an acquisition.

He will require all buyers to sign a Confidentiality Agreement before any information about your company is shared with them.

Number 6: Your broker receives Letters of Intent and other offers and proposals. He will guide you in accepting an offer, rejecting it, or making a counter-proposal.

Once he has negotiated an offer that meets your requirements, a time is scheduled for final buyer discovery. This is called due diligence. It is part of your intermediary's job to manage the due diligence process. Plus, he negotiates any further deal points that may come up.

Finally, number 7, he calls in the law. To protect both parties, a qualified business transaction attorney is retained to prepare the final closing documents. When they are ready, your broker sets a closing date that results in a done deal.

To summarize: Packaging, deal structuring, finding and checking out buyers, managing offers, and closing. These are most of the common activities undertaken by a qualified business selling professional. Any investment you make in such services generally leads to a greater payoff at the closing table.

No comments:

Post a Comment