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Do you need an intermediary to find the perfect match?

In many areas of our lives, the internet is now the intermediary. Where once we visited a travel agent, phoned our insurance broker, or went to the pub to meet friends, we increasingly undertake all these activities online. Recent events have accelerated this trend further, changing the way we engage and consume forever. However, while the convenience is compelling, the outcome is not always better. Indeed, in many cases, a combination of technology and human contact brings the best results.

And this is certainly true when it comes to finding a business to buy or finding a buyer for your business. The use of an intermediary can be a good idea for a variety of reasons; confidentiality, discretion, structure and the ability to interpret and defuse tricky situations.

When it comes to finding a firm, an intermediary is very helpful in some instances, but not always essential. Many of the deals we’ve worked on in the last few years have been between two firms that already knew each other or moved in similar circles. Once one owner chatted to the other in a relaxed setting, a deal was born. In our experience, these deals have the highest success rate. Whether it’s a study group, working party or a face you always see at a local CPD event, the firm that represents the best possible fit for your clients, is often already known to you.

Much like retail clients need to understand the power of an independent adviser, if you do use an intermediary you need to make sure they are working for you. The best way to determine this is to understand their incentives. The majority of business brokers are paid by the buyer. This can be fine, if it’s fully disclosed at the outset and understood by both parties. Where a broker states that they are independent and are able to source deals from the whole market, they are not necessarily saying that they are acting on the seller’s behalf. In the past, brokers have generally preferred to work with consolidators as these firms have capital to deploy and need a higher volume of deals. Hopefully this dynamic is changing as capital providers enable deals to take place between independently-minded advisers. Either way, you must understand the incentives, and who the intermediaries are representing before engaging their services in a transaction.