Anyone have experience working direct with an owner rather than a broker?
April 20, 2021
by a searcher from IE Business School in Dallas, TX, USA
Any tricks of the trade when dealing with the original owner while going through the bid/purchase process? Not sure why he's trying to do this all himself other than to save on costs, but he's been bogged down and busy. Kind of annoying not getting info needed from him timely.
from Universidade Católica Portuguesa in Lisbon, Portugal
Some of the best deals I've seen were working directly with the seller, the key reason for that is that normally the seller is not talking to a lot of people so you can negotiate better deals because of less competition. Having said that, they normally take a longer time and are much more of a roller coaster/lower odds, this is because even when the seller engages with you, a lot of times he has not made the decision to sell, he is normally not well organized (has his documents in order) and the sale is not normally their focus, they are normally looking at it opportunistically. You may do all the work of convincing him to sell and then he goes out and hires a broker to run a competitive process (very common in larger companies). So better deals, but harder and longer to get done with more hiccups along the way.
The broker does have a role to play as was mentioned in helping prepare, knowing what the best practices are and sharing the education of the seller with you. Just the fact that he hired a broker means the seller took the conscious decision to pay someone to sell his company for him, even if just a success fee, that already increases the likelihood that a sale will happen.
The one piece of advice I would give would be broker or no broker establish a relationship with the seller, understand him and his motivations. You probably want a good relationship with him if you end up buying his company, you may even want him to stick around and ultimately you are taking over his proud & joy and a key piece of his life, so having those ties established can make all the difference in the world. Let's not forget, he was the one building or running the company so if you don't get along with him and don't see eye to eye on quite a few things, you may have a lot of cultural issues going into the company you bay off him, and it can quickly go from an acquisition to a turnaround.
The above is of course a generalization, each seller is a unique case and will have his own way of looking at the world.
Hope this helps.
from New York University in Menlo Park, CA, USA
1. My owners are all motivated to sell, which is why they've engaged with me. You'll spend lots of cycles learning about a business and working with the seller only to realize he's not actually ready to sell but just wants to test the waters for a valuation.
2 . My owners are prepared to go to market. We have the critical information ready for qualified buyers, and everything is in writing ready for analysis.
3. I know my sellers and have developed a relationship with them. I'm there when they get cold feet or feel they've hit a wall with the buyer. I can usually help them work through the issues and bring the parties together through the misunderstandings that can develop during the process.
Of course, I don't work for free so my fees are already priced into the deal. Having someone whose been through the process before usually saves lots of time for both parties. I also bring an additional set of eyes to double check documents for errors and omissions. I believe the benefits of having an intermediary usually far outweigh the fees my firm charges sellers.
On the other hand, I will also expose the deal to a very wide audience of potential buyers, this will frequently push up the final transaction price due to the competition I can create through my network of buyers. You might find a better "deal" by working directly with the seller but you'll pay back your dollar savings with a significantly higher time investment and potentially a more risky deal.