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Working with advisers to secure your exit deal: the pros and cons
At a glance
- Advisers such as brokers, agents and corporate-finance specialists can play a key role in helping you sell your business, from finding a buyer to negotiating and completing the deal.
- A broker or agent may be of particular interest if you have a large or complex business. A good adviser will have knowledge of your industry and market, and know who to approach.
- Make sure any adviser you work with will act in your best interests. Take time to do thorough research and ask for recommendations and referrals, in order to find the right fit.
Most exiting business owners use advisers to help them find an appropriate buyer, then guide and manage the sales process. These advisers might include brokers, agents or corporate-finance advisers. They may describe themselves in different ways, but typically brokers focus on finding a buyer; agents help you negotiate the deal; and corporate-finance advisers handle most or all of the process from search to negotiation and completion.
Using advisers could help you in many other ways, too. For example, they can advise you on how to make your business more appealing to potential buyers and assess the value of an offer.
Here, we explore the role of advisers in selling your business, the pros and cons of working with them, and how to choose the right ones for you.
Using advisers to help sell your business – the pros
There are multiple benefits of using a business broker, agent or corporate-finance adviser. A good broker will likely have contacts that help you find an appropriate buyer. They will typically send brochures to interested parties; create a list of potential buyers; get expressions of interest and offers; then move forward with one buyer.
A good agent can then help you negotiate towards completion based on their deep experience doing this in your sector. And a corporate-finance adviser can also offer advice and support on the process, and help execute or oversee it.
If you’re selling a business of significant value or complexity, it’s recommended having corporate finance or other skilled advisers on board. If you get the right one, they will know your market or industry and know who to approach.
However, there are plenty of operators that take an untargeted, scattergun approach and ultimately offer little value.
Your adviser should be able to help you add value in several ways. For example, they should see a lot of deals and understand deal mechanisms. Sales processes typically include lots of discussion about the consideration – you could get paid in many ways, including cash upfront, and or deferred consideration. A good adviser can explain these to you and help you assess the options based on your needs and their experience of the market.
Advisers can also help you assess whether the buyer is reliable, likely to negotiate fairly and see the purchase through to completion. Plus, they can talk you through the risks such as undervaluation, confidentiality breaches, legal disputes and emotional challenges.
Disadvantages of using a broker and agents
One major potential disadvantage of using a broker, agent or corporate-finance adviser is the cost, which is often a percentage of your sale price. It’s usually between 1% and 10% – and can equate to tens of thousands. Check with your accountant and financial adviser how those fees might impact your long-term finances and whether you’re getting good value.
Many brokers and agents are not interested in anything other than getting the sale underway [so they can make the commission]. A good one will always look after their client’s best interests, which might include advising you to walk away from the deal.
If the deal goes ahead, I’ve also seen some more engaged with the process than others. Good ones will be engaged throughout to help you get the deal over the line.
Another disadvantage of using a broker is the risk they will promise much but under-deliver. They may also still claim a fee regardless of success.
Look for a broker or corporate-finance house with a success rate of more than 60%. Good advisers will ensure both buyers and sellers are well prepared before starting the negotiation, to increase the chance of success. If your broker doesn’t do this, you may discover down the line that the buyer is not serious or committed, and they end up dropping out.
These are critical things to watch out for because a poorly managed process could lead to you feeling exhausted, and you may end up walking away with nothing but still having to pay a considerable adviser’s fee. It does happen.
How to find the right sales broker for you
Selling a business is often the culmination of a life’s work and an important source of retirement income, so it’s worth spending time finding the best advisers for your needs.
Ensure any adviser you work with understands what you want for the future of your business and your personal life after exit.
The right advisers are safe advisers. It’s a bad idea just to choose ones with lower fees or who promise to get the deal done fastest. That doesn’t mean you need the most expensive, but you do need advisers who you feel will do the best job for you and look after your interests.
Don’t look at the fees first. Rather, think about whether you can trust them to get the best value from your business and help you through the sales process, which is often stressful.
Get recommendations from other businesspeople, especially those who have sold their business successfully. Create a shortlist to meet in person. Ask them in detail about how much support and engagement they offer at each stage of the sale process, and what’s included in their fee.
Find out if most of the adviser’s work comes from referrals, advertising or other sales techniques. Ask them to refer you to previous clients you can talk to – and try and find some independently. Research the adviser online and look for any positive or negative reviews or comments.
Finding the right people can take time, but it should be well worth it if you ultimately get a good price for your firm and a relatively smooth and stress-free exit.
Get the right wider team
Brokers and corporate-finance houses are not the only advisers you need when selling your business – you typically also require tax, legal, accountancy and personal financial advisers.
Speak to us so we can help you gather the right team and also make sure your personal goals align with your exit plans.
Get in touch today.
We work in conjunction with an extensive network of external growth advisers and SME specialists who have been carefully selected by St. James’s Place. The services provided by these specialists are separate and distinct to the services carried out by St. James’s Place and include advice on how to grow your business and prepare your business for sale and exit.
SJP Approved 09/11/2023
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