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in General Business Brokerage by Russell Robb

The following is taken from the preface of Selling Middle Market Businesses: Guide Book for intermediaries by Russell Robb.

There is a movement afoot whereby business brokers are moving up-market from selling Main Street businesses to selling companies in the lower-end of the middle market, previously the exclusive domain of the M&A intermediary.  There is no precise definition of lower-end of the middle market as some people would clarify companies with sales between $5 to $100 million, while others would classify this category as companies with sales between $3 to $50 million.

There is a natural tendency for business brokers selling Main Street companies to move up market where the commissions are more lucrative.  It is as natural as real estate brokers who often start-off selling residential houses for $300-$500 thousand to move up-market to eventually sell multi-million dollar homes.  But, the game is played differently at these two levels, and the valuation methodologies are dramatically different between Main Street businesses and the middle market businesses.

Business Broker vs. M&A Intermediary

The following is a short list of highly abbreviated differences between a broker and an M&A intermediary.

Size of Business Sales$100k – 3M$3M-100M
Type of BusinessesRetail StoresManufacturers
DocumentationMinimalExtensive Offering
Brief Write-upMemorandum (30-50 pages)
Type of BuyersMostly IndividualsStrategic
LocalsPrivate Equity Groups
CompensationUsually no RetainerRetainer
10-12% CommissionStructured Commission
Minimum $150 to $500k
Sale ProcessAdvertisingControlled Auction
Email BlastsSpecific Time-line
Many Buyers Visit SellerFew Management Meetings
Firm’s AdvantageNumber of Seller ListingsSpecific Industry Focus
Duration of Contract12 months6 months then Renewable Thereafter
ConfidentialityExtremely TightInvolve CFO & probably Sales Manager
After Hour Visits
Only Owner Aware
FinancialsUse of very limited figuresExtensive Analysis
Decision MakerFounder/CEOFounder/CEO and/or Board of Directors
FeesAround 10% CommissionScaled depending on size such as:
     4% on $10M deals and 1% on $100M deals
     with minimums of $150k, $200k or $500k, etc.