Buy-side adviser vs business broker: what's the difference?

If you are thinking about buying a business, you will probably meet a business broker before you meet anyone else. Brokers advertise businesses for sale, send out information packs and arrange meetings with owners. It is natural to assume they are helping you. In one sense they are, but in most cases they are not working for you.

The difference comes down to one question: who has instructed the adviser, and who pays them? That decides whose interests they are there to protect. Neither arrangement is better or worse. They are different jobs.

Who is on whose side?

A business broker (sometimes called a business transfer agent or, for larger deals, a sell-side adviser) is normally hired by the owner who wants to sell. Their job is to find a buyer and complete the sale on good terms for that owner.

A buy-side adviser is hired by the business that wants to buy. Their job is to help you decide what to buy, find the right businesses, check what you are really buying and agree a price and terms that work for you.

Scope varies a great deal. Some brokers list many small businesses and handle the marketing. Others run a full sale process for one owner at a time, much like a corporate finance team. Buy-side advisers vary too. The table describes the usual roles, not every firm.

What does a business broker do?

A broker's work for the seller typically includes agreeing an asking price, preparing an information pack about the business, marketing it to likely buyers, managing confidentiality agreements, filtering enquiries, collecting offers and keeping the sale moving to completion.

Brokers are usually paid by the seller, often with a fee on completion and sometimes with an upfront or marketing fee as well. Terms differ between firms, so if a broker asks you, the buyer, to pay anything, ask what it covers and get it in writing.

A good broker can make a buyer's life easier. They have a seller who has decided to sell, a pack of information ready to share and a timetable. They want the deal to complete, so they have every reason to answer questions quickly and manage the seller's expectations. What they cannot do is tell you whether this is the right business for you or how much you should pay. Their duty is to their client, and the seller does not owe you advice either.

What does a buy-side adviser do?

A buy-side adviser starts from your side of the table. The work usually covers:

• What you want to buy and why. Turning your growth plan into clear criteria. See what an acquisition thesis is.
• Finding businesses. Researching the market for businesses that fit, including owners who have not put their business up for sale, and approaching them in confidence. See how to find off-market targets.
• Assessing and valuing. Testing whether the profit is real and what the business is worth to you.
• Negotiating. Agreeing the price and main terms in writing (heads of terms), including any part of the price paid later if the business delivers (an earn-out).
• Coordinating the deal. Keeping your accountants and lawyers on track and checking their findings against what you set out to buy.

A buy-side adviser does not replace your accountant or solicitor. Financial, tax and legal checks are normally done by specialists, paid separately. For more detail, see what a buy-side M&A adviser does and how buy-side fees work.

Where can interests differ?

Most of the time the broker, the seller and the buyer all want the same thing: a deal that completes. The differences show up in a few specific places.

• Price. The seller's side wants the highest price. You want a fair one.
• Timing. A seller's process may set deadlines for offers. That keeps things moving, but it may be faster than you would choose.
• Information. The sale pack presents the business in its best light. That is reasonable, and it is also why you check it.
• Structure. How much is paid on completion and how much later, and on what conditions, matters differently to each side.
• Choice. A broker shows you the businesses on their books. Whether a better fit exists elsewhere is not their question to answer.

None of this means anyone is acting badly. It means that someone on your side needs to look at each of these points with your interests in mind. For an experienced buyer, that might be you, your finance director and your lawyer.

A worked situation

This example is illustrative and fictional.

Sarah owns a £15m facilities services business in the north of England. A broker emails her about a regional competitor with about £3m turnover. The owner is retiring. She signs a confidentiality agreement, receives the information pack and is told that indicative offers are due in three weeks.

What the broker has given her is valuable: a willing seller, a pack of information and a route to a meeting. What remains with Sarah is everything that decides whether this is a good deal for her:

1. Does it fit? Is this the business she would choose if she could pick any competitor in the region, or simply the one that came up?
2. Is the profit real? The figures need adjusting for the owner's salary, one-off costs and anything that will not continue after a sale.
3. What is it worth to her? Not the asking price, but what she can pay and still make a return. See valuing a business before buying.
4. What should the checks cover? Customer contracts, key staff, property and any liabilities.
5. How will she bring the two businesses together without losing people or customers?

Sarah has never done a deal. She decides to make an indicative offer, instructs her own accountant for the financial checks and a solicitor for the legal work, and brings in buy-side support to help her value the business and negotiate. She also asks for a short map of other competitors, so that she is judging this opportunity against the alternatives rather than in isolation.

A buyer who had completed several similar deals might reasonably skip the buy-side support and rely on their own team. Both are sensible choices. The point is to decide deliberately which work remains to be done, and who will do it for you.

Questions to ask before you appoint anyone

Whether you are dealing with a broker or appointing an adviser, these questions make roles clear early.

• Who is your client on this deal? Get the answer in writing.
• Who pays you, and how? A fixed fee, a monthly fee, a success fee, or a combination. Ask whether any fee is payable by you as the buyer.
• What exactly is included? Does it cover valuation, negotiation, coordinating due diligence, approaching owners? What is excluded?
• How do you handle conflicts? Do you also act for sellers? Could you act for a business you might want to buy?
• What evidence can you show? Deals completed on the buy side, references from buyers and the people who would actually do the work.

Which support makes sense when?

You can compare the options side by side on our services page. Acquisitiv works for buyers only.

Talk it through

If you are looking at a brokered opportunity, or wondering whether the right business is out there but not yet for sale, an Expansion Briefing is a free 30-minute call with us about what you want to buy and the support that would actually help. You get a short written summary and a recommended next step, which may well be to carry on with the team you already have.