Broker Etiquette

November 20, 2024

by a searcher from Boston College - Wallace E. Carroll School of Management in Newport, RI, USA

There was a deal I looked at maybe six months ago that was a great strategic fit and looked like a great business, but was ultimately in the wrong geography so I bowed out and didn't submit an IOI. Now there's an almost identical business for sale, but in the right geography. The seller's broker is completely out to lunch, doesn't know the basic details of the company, didn't show up for the seller interview phone call, and the company honestly isn't particularly well-positioned for a sale to maximize value for the Seller's. That's all fine for me, because I have a decent grasp of the business operations. But, the broker here is going to be useless when it comes to conversations around deal structure and values.

The broker on the previous deal that I worked on was extremely professional and represented the Seller very well. How appropriate/inappropriate is it for me to call them up and try to dig for some information around the winning bid on the previous deal, most importantly around deal structure and how some key employees were handled in the transaction? Will brokers look at this as a breach of their confidentiality with the Seller or is this just part of professional development for all parties?

Reply by an intermediary
from The University of Chicago in Chicago, IL, USA

I would not recommend contact the broker of the previous deal. You risk relationship with the new broker and potentially send a negative signal to the seller a) you short-circuited the broker, b) you are questioning seller's competency in broker selection, c) you are risking confidentiality of the business sale. Sounds like you have already talked to the seller. Send your ask to the broker and to seller if possible. In addition to broker being incompetent or new in the business, there is a good possibility that he/she is following the marching orders. Patience will put in better light if the broker is the problem.

Reply by a searcher
from Stanford University in North Carolina, USA

Brokers are bound by confidentiality agreements with their clients, and any direct questions about deal specifics could put them in a tough spot. However, if you are framing the conversation as a learning opportunity rather than an inquiry into sensitive details, it’ll likely be better received. For example, you could ask open-ended questions seeking their perspective on deal structures in that sector or how buyers typically handle key employees in transactions, without referencing the specific past deal.

Hope that’s helpful!

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