Declining buy-side representation from broker
March 11, 2021
by a searcher from Carnegie Mellon University - Tepper School of Business in Pittsburgh, PA, USA
I'm early in broker outreach for targeted geographies and wanted to get this community perspective on - how do I politely decline buy-side representation from a broker and not tank the relationship?
To get in front of some responses I anticipate in the comments; for what I'm seeking and the team I'm already searching with, I don't need buy-side representation services from a broker.
Thxs!
from University of Western Australia in London, UK
Brokers who work predominantly on the sell-side but handle some buy-side mandates will have two options for you: (1) simply be on their database so that when they are representing a suitable client on the sell-side they will bring the deal to you, along with every other buyer that they believe this deal is a good fit for, or (2) agree a buy-side fee structure for them for situations where they speak to business owners who are not looking to sell, but who would be open to a confidential discussion with one buyer who is interested in businesses of their size, industry etc. Brokers come across a surprisingly large number of the latter - people who are not yet ready to sell, or don't want to actively market the business, but would be open to a conversation with one buyer who is specifically looking for a business like theirs.
from Coastal Carolina University in Los Angeles, CA, USA
Get creative on a non-exclusive deal structure for brokers that aligns with your goals and incentivizes them to provide dealflow from companies they are not representing (i.e: I've seen milestone based payments work well, such as a small fee for each stage in the pipeline a target enters and then a success fee). It's low risk for you and incentivizes them more than a traditional success fee only engagement (which typically results in either never seeing a deal or seeing a deal that they will send out to 10 other success fee clients).
If you are trying to avoid the "buy side representation" conversation, I'd recommend spending that time building a target list of companies and or people who are in a position to recommend targets from their network (For example, if you are looking for technology enabled services companies that provide implementation to software such as Adobe, Salesforce, etc. reach out to the people who are in charge of technology partnerships at those companies. They may be able to introduce you to some good targets within their ecosystem and it will give you a bit more credibility.