Curious about engaging a broker/ sale side advisor in Canada/ USA:

March 07, 2023

by a searcher from INSEAD in Houston, TX, USA

For all brokers / sell side advisors in the group: What is the benefit of engaging brokers /sell-sided advisors.

In particular, are the deal sourced from these are:

- Off-market / Sourcing: Are the deals exclusive to one broker/sell side advisor? I see similar deals listed on some online platforms which tells me they are heavily shopped and end up with the highest bidder.

- Due diligence: Do brokers/ sell side advisors perform additional due diligence on the companies they represent or they relay the message from the owner?

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Reply by an intermediary
from Wesleyan University in Granville, OH, USA

^redacted‌, important point on conflict of interest. Reading between the lines of the original questions, in theory a broker represented seller will be getting guidance on the process and that can help all involved. Small business owners mostly only go through this once and they need advice or what's customary and reasonable. The broker can act as a buffer between buyer and seller to smooth any potential bumps in the road. Unfortunately, as with any service, SMB brokers aren't always attentive to their clients and counterparties. Brokers with exclusive deals of larger businesses, e.g. tens of millions and up, typically do not 'post' deals, but do personalized and researched targeted outreach. Those brokers will usually refer to themselves as Investment Bankers rather than Brokers even if they aren't FINRA licensed.

Reply by an intermediary
from University of Virginia in Metuchen, NJ 08840, USA

Adding to Mike’s comments, some of it is semantics. Brokers or Investment Bankers will not say that anything was verified because of liability issues but the line between discovery and verification is sometimes thin. Having worked with a public accounting firm, I have also seen the kind of disclaimers auditors include in their “verification” after spending months on completing checklists. Recently there was a famous case of JP MORGAN suing the seller of a fintech company as one of the most sophisticated banks in the world could not verify the authenticity of the customers that the target firm claimed to have. Hiring good counsel and a CPA/due diligence firm is our standard advice to our buyers.

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