Screening a seller's broker?

April 20, 2022

by a searcher from Northwestern University - Kellogg School of Management in Deerfield, IL, USA

I’ve heard that a good broker can guide the seller and help to close a deal, while a bad broker can provide bad advice and effectively kill a deal. My question is: should the quality of the seller’s broker come into play when screening businesses?
If yes, how do you identify good brokers when screening businesses? What are some red flags to look for in bad brokers?

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

You are in my backyard. I taught at Kellogg for 17 years and discussed the question you are asking. Not an easy answer. As you keep looking, you will learn how to distinguish between good vs poor brokers. Few pointers: The more the broker understands the business, the better. This is less likely, if the broker or the firm has too many listings. Does the broker ask you enough question to qualify you or is only interested in the price and whether you have $. In reverse, a buyer who holds back information about themselves, their capital sources etc. puts the broker off. Not an easy question to answer, but happy to talk.

Reply by a searcher
from Northwestern University in Indianapolis, IN, USA

I agree with the feedback Mike provided. For many Sellers, this is the first time they are going through this process and looking to their broker for experience and advice. When coming across a business that is represented by a broker, I view them as a partner in the sale process and develop a trusting relationship accordingly. It usually becomes apparent if they are going to be an advocate for you or not (similar if someone else would advocate for you in a different professional setting).

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