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Interested in good and bad experiences with buy-side broker engagements

I am investigating the purchase of an existing business and have come to the conclusion that I would be well served to engage a buy-side broker to help with the process. I am interested in both positive and negative experiences anyone would like to relate. Looking for a business without this seems a daunting task and several acquaintances have been unsuccessful in doing so. I am also open to purchasing a business that can be relocated.

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The BAF Group LLC
MD

We provide a fair amount of Buyer-Broker services. Virtually all of it is with corporate Buyers, because there is relatively little to be gained by the average guy (or gal) looking for "mainstreet" kinds of acquisitions. I have spoken with several private individual Buyers that have called as a result of some of my comments here, and have turned away every one of them for prospective Buy-side representation - after giving them some suggestions as to how to go it alone.

I would agree with most of Jessica Hadler's comments, with a notable exception being that we rarely make an arrangement for less than a 12-month period. One deal that was exceedingly difficult has taken three (3) years to come to fruition, with difficuties on both the Buyer's and Seller's sides, and the economy almost killing the deal in between! There are a LOT of issues that go into some of these deals that can slow the process, incredibly.

If you want Buy-side representation, you will undoubtedly pay a fee. How much and when is subject to negotiation between you and your Broker. But in Business Brokerage, sharing commissions by Listing Brokers is virtually unheard of. So, reconcile yourself to that, early.

Decide on what you want the Broker to do and not do, in advance. That is a real key, in order to alleviate have the Broker waste his/her time, and therefore wasting yours.

If you have questions, give a call, at (410) 715-0700.

Dec 23, 2009
Jessica Hadler Baines
American Business Group, LLC
President
Orange County, FL

This is actually a refreshing concept -- hiring someone to help you locate the right opportunity. Good idea to consider, especially since so many opportunities do not make it to formal advertising venues, such as bizbuysell.

The great thing about being in Georgia (and if you're looking for opportunities in Georgia) is that there are extensive professional associations available to brokers to help them gain access to many opportunities that are not always posted elsewhere, like bizbuysell. The broker can go outside of the box to find listings that meet your criteria without having to worry that he or she is only trying to push you toward their in-house listings.

I believe the only negative side would be in how and with to whom you commit. If you call saying that you want to engage a broker, be prepared to sign an exclusive contract for a certain amount of time. The agreement must have an end date to be binding.

They may or may not ask for a retainer. Typically, most brokers have shied away from asking for upfront fees, however, due to the recession, I have seen this trend on the increase -- both with the inexperienced and the more experienced and credible brokerages. In a good market, it can take up to 7-10 months to locate and close on a business; today, that search can take even longer, accounting for more deals falling through during due diligence. That means that while they work for their clients, they still have their own office rent in the meantime to be paid.

That being the case, take a good look at your brokers' credentials and interview several before committing. If there is a fee involved, ask that it be refunded should a deal successfully close and have it in writing.

Brokers will typically seek an engagement of at least 6 months. If you are not comfortable with this, tell them you can't commit to that, but would still like their assistance. And if they do not ask for a profile and financial statement from you, pass. A serious broker who is motivated and wants to do deals needs this information to best serve you.

Good luck, and happy New Year!

Dec 23, 2009

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