Buy-side brokers

November 16, 2022

by a searcher from Georgia Institute of Technology in Atlanta, GA, USA

Anyone have experience with buy-side brokers? Anything you can share…positive/negative? How long did it take to find a target opportunity? Would you be willing to give a recommendation for a broker you have worked? Thanks in advance.

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Reply by a searcher
in Dacula, GA 30019, USA

Appreciate the tag.

I’m an unusual animal in that I’ve personally done 21 deals MYSELF before I ever started offering M&A advisory.

I broker deals in an unusual way for sell-side in that I require a $50K deposit or monthly retainer, turn down 90% of deals, and prefer to be brought in 6 months at least before listing so that I can advise on any fixable “warts” and get them fixed to maximize exit. I built an entire program around that.

On the BUY side, I agree with comments above that I’d never consider a success-only fee because it creates a conflict of interest.

Not all deals are good and I’d never want to be incentivized to convince a buyer to take a bad deal just to make a buck.

I personally take a different approach all-together:

I will only JV deals on the buy-side with an included buyout clause for me.

So I source, structure and negotiate the deal and keep generally 10-20% equity.

I then allow a buyout of my share equal to a minimum amount OR a 3 years of what WOULD have been my profit cut to be executed at any time.

In the case of cashflow challenge, I will allow that amount to be converted to a debt payable monthly as opposed to lump sum.

There are limitless ways to work a deal like this in a win/win way…

It boils down to what is your brilliance, and what are your gaps?

I’m gifted at sourcing, negotiating, structuring, and turnarounds.

I DO NOT run daily ops.

So I work deals accordingly.

Hope that was helpful.

Reply by a searcher
from Emory University in Marietta, GA, USA

Rick, as with all answers, it depends. I have found that the most challenging part of part-time searching is creating and keeping "The Deal Machine" churning. On the market, deals are a scramble, and I compromised on my thesis statement to get an opportunity close to my house. And if I were doing proprietary outreach (which takes a lot more work, as noted above), and the potential seller asked me some softball question to gauge my knowledge, if I were to flunk that question, then I would expect a seller to hang up in my face. But my recent experience with a broker is that they already have a Deal Machine and best practices under their belt. Once you are an owner, you can work in the industry with a sense of accomplishment. But for now, I need to be efficient and effective and only acquire per my thesis statement. And maybe give it a year. If that doesn't work, then change the formula. I'm trying to learn from my mistakes. You must ask yourself, "What has been unsuccessful until now?" But with your grit and determination, you will close either way, but will you do all the work yourself or have help along the way?

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