Exclusivity in Broker NDA / Buyer Registration Form
January 23, 2025
by a searcher from Harvard University - Harvard Business School in Toronto, ON, Canada
I have received a Buyer Registration / Confidentiality agreement from a Broker Network that is asking me to be exclusive with them for any business that they introduce to me for a period of 4 years. Is this typical?
I understand that Brokers don't want a buyer or a seller to circumvent them (and that is not my intent) - so some restriction is reasonable, but 4 years felt like a lot.
What if a business is listed with multiple brokers or on multiple public websites? What if a seller terminates a relationship with a broker because they don't get the terms / price they want and then go with a different broker? Or if they take the business off the market and put it back a couple of years later with a different broker.
Will be great to get thoughts from both searchers and brokers in this community on how they see this issue and potential resolutions. Thanks.
from University of Pennsylvania in Indianapolis, IN, USA
That said, you need to ask if they are representing the seller (playing both sides), remarketing another broker's deal, or if it is a proprietary introduction for an off-market deal.
A tail on playing both sides or remarketing a deal should have a 12-month maximum. You should also make it clear to them you do not want to see remarketed deals (unless you do), because there are far too many "brokers" in the market who try to step in front of a sell-side process for a fee. I know one, specifically, who only remarkets deals, but their client pays them to reach out to all the intermediaries and manage those relationships for their office.
Now coming across a represented deal does happen honestly and if seeing that deal is delivering value to you/the buyer then it can be worth a fee. Like Mike, I have earned full success fees on deals that were being marketed by a broker or IB where my buy-side client was not on the distribution list and had no idea the asset was on the market, but I was also already reaching out directly to the company for my client's search and not simply jumping in front of a deal published on the internet.
If you suspect they are just remarketing deals, you could suggest a 50% haircut on success fees for deals represented by sell-side brokers to gauge their response.
Lastly, I would be very wary of signing this agreement because it sounds as if they are just trying to get you locked up and toss you deals that are on the market in the hope that they can tag you for a fee later where they didn't do much. Trust yourself and good luck.
from University of Tennessee in Nashville, TN, USA
I'm a big fan of Brokers earning their fees. Presenting another Broker's deal to a Buyer, then demanding $75k+ in fees doesn't meet my standards. I don't deal with firms like Gottesman but you are free to decide what's best for you.
Caveat emptor