What is the difference between Investment Banks, Lower Middle Market M&A Specialists, and “Main Street” Business Brokers?
The term “lower middle-market” refers to businesses typically with revenues from $3 million to $50 million. Lower middle market M&A advisors like Gold Country Advisors are exclusively focused on these mid-sized businesses that often fall below the radar screen of investment banks, which tend to favor much larger transactions because of their fee requirements.
Investment banks also know that selling small to mid-sized companies can be time-consuming and challenging work. They know that buyers of these companies are not easily identifiable, nor are they often highly sought after by larger companies. And they are acutely aware that these companies require great skill and expertise to position and sell.
At the other end of the spectrum are so-called “Main Street” business brokers. These brokers typically represent businesses with annual revenues under $3 million. They take on multiple small business listings in a defined geographic/market area and match qualified buyers with sellers. They are able to handle many transactions at a time through a staff of commission-only sales agents, but these agents often lack the larger transaction experience, credentials, national buyer networks, and professional affiliations to be effective in the lower middle market.
As outlined in our Process, an M&A advisor fulfills many important roles that are critical to a successful transaction. Put simply, selling a company requires an intensely focused process over a relatively short period of time to maintain buyer interest and keep the deal moving forward. One of the biggest reasons for deal failure is lack of follow-through with prospects and/or what we call “deal fatigue,” which is when the process drags on without purpose, loses momentum, and ultimately stalls for lack of interest. A good M&A advisor keeps the process on track and holds buyers accountable for timely decision-making.
In addition, selling your company can be an emotional and stressful time for the owners. A professional M&A advisor ensures the process is coordinated smoothly, with arms-length contact between buyer and seller to minimize potential conflicts. The biggest mistake an owner can make is to neglect his business while it is being sold, causing revenue and profits to erode. This is a sure “deal-killer,” as no one wants to buy a business perceived to be in decline.
Maintaining confidentiality throughout the sales process is of paramount importance. Owners do not want employees, their customers, vendors, or the general public aware their business is for sale. Gold Country Advisors adheres to a strict policy of not disclosing the business to anyone outside of our office other than the buyer prospects we are working with who are legally bound to maintain confidentiality under a signed non-disclosure agreement.
Professional representation more than pays for itself, particularly when it comes to navigating through the complexities of a business sale. As outlined, each business requires a customized approach. Our fees will be addressed in a proposal for services after our initial meeting to better understand your requirements.
In general, it takes at least eight to ten months to complete the sale of your company. In some cases, however, it can take a year or longer to find the right buyer. In this business, patience truly is a virtue.