My grandmother, Pearl, had an expression to describe a talented salesperson, she would say “that person could sell ice to the Eskimos”. The expression resurfaced in my mind after reading the following story in the Wall Street Journal about the premium value being achieved for frozen water currently in specialized marketplaces. https://www.wsj.com/science/environment/greenland-arctic-ice-dubai-trump-db2b4cae As the saying goes, “Perception is Reality”. It would be interesting to taste test a good bourbon on the rocks with three different ice cubes including the one from Greenland to see if quality is enhanced with the product. Quality matters in the selection of most products and professionals.
One venue where quality can make a significant difference is in the selection of a mergers & acquisitions intermediary to sell a privately held company. The spectrum of quality between professionals can impact the price, terms, liabilities assumed, and the timing achieved associated with the sale of a business.
It is a given that a business broker should be vetted on their knowledge & experience. It is not difficult to assess that a business sale intermediary who has successfully facilitated a hundred transactions has more experience than one that has gotten ten deals across the finish line. Similarly, a business broker who has completed a dozen transactions in a specific industry in the last couple of years should have more knowledge about market dynamics and deal terms in the space than someone who has never sold a business in the industry sector.
However, the successful sale of a privately held company or family business will often not come down to knowledge and experience, but to the negotiation and deal facilitation ability of the professional M&A intermediary working diligently to get the parties to “Yes” and a firm handshake of agreement.
This sale process can be divided into the following three different pitches, using the definition of to attempt to persuade especially with a sales pitch from Merriam-Webster (https://www.merriam-webster.com/dictionary/pitch). Using an alternative definition of the word in a baseball context, it would be the equivalent of a business broker having command over a fastball, curveball, and change-up on the mound in the high pressure environment of facilitating a business sale.
The first pitch that a business sale intermediary must possess is the ability to articulate information in a manner that results in comprehension. Business brokers are the professional voice for their clients. A high caliber business broker will be able to convey the financials of the business, its business model, competitive position, and other relevant facts in a manner where they are understood and the need for repetition is mitigated. This presentation does not require significant thought and analysis. The information shared is often obtained from others. It is a kin to a musical artist covering another musician’s work. Ask yourself would your rather hear The Zutons, who wrote Valerie, sing the song in concert or Amy Winehouse (https://youtu.be/6pAz9UpnRKw?si=MzExIheEUg61_Ns3).
The second pitch that a business broker needs to possess is the ability to educate. Often a path forward is possible if knowledge is disseminated to appropriate parties. The knowledge shared can be sourced from an array of professional disciplines and is frequently obtained through being at the negotiating table in prior transactions where it was utilized. Common areas where comprehensive and deep knowledge is needed by mergers & acquisitions professionals include accounting, tax, finance, law, insurance, and real estate. A top-tier business broker should posses enough knowledge to educate and the ability to bring in collaborative partners able to take the discussion from an operational level to one where implementation can occur. Nothing captivates like an articulate, knowledgeable speaker. If you want to learn from some of the best teachers in society, I encourage you to watch some of the TED talks highlighted here (https://www.ted.com/playlists/171/the_most_popular_ted_talks_of_all_time). They are the annually updated list of the most popular TED talks of all time.
The third pitch a M&A intermediary needs to be able to deliver, often in a pressure situation under the bright lights, is the ability to persuade. Persuasion is the ability to get a party to do something they are not inclined to do naturally. The definition of a “fair deal” in a mergers & acquisitions transaction is one where both parties feel they have given a little too much on the pathway to reach agreement. Virtually every transaction has situations where parties need to be persuaded. My team at IBA, the Pacific Northwest’s oldest & largest business brokerage firm, is very familiar with my statement, that “companies do not sell themselves, business brokers sell them.” When a potential client says, “Your commission rate is too high, I will sell the business myself, our standard response is good luck, we will be here if you need assistance in the future.”
The following is some simple math to consider when deciding whether to employ an A, B, or C level business broker to sell your business. IBA sells companies for six, seven, and eight figures annually. This example is a round figure, but could be reduced by 90%, if you are engaging with one of IBA’s small business specialists, or increased five fold, if you are working with our M&A team.
Let’s say that a business has a market value in a 10% range between $4.5 and $5 million dollars.
If a C grade business broker could sell it for $4,500,000 and would charge a 4% commission, the net proceeds to ownership would be $4,320,000.
If a B grade business broker could sell the business for $4,750,000 and would charge a 5% commission, the net proceeds to ownership would be $4,512,500.
Finally, if an A grade business broker could sell the company for $5 million and would charge a 6% commission, the net proceeds to ownership would be $4,700,000.
As is common in life, you get what you pay for when selecting products and professionals.
It should also be noted that how a M&A firm is compensated speaks volumes about their ability. IBA for 50 years has operated with a paid on performance business model where we only seek compensation upon successful completion of a project. Business brokerage firms that charge for evaluations, consulting, or administrative fees are saying to their clients that they consistently do not have enough success to cover their operating costs between transactions and need front end payments to pay their bills.
IBA has successfully achieved more sales for our clients, almost 4400, since 1975, than any other business brokerage firm in the Pacific Northwest. We are willing & able to take the mound for you and be paid for our time & effort based on the outcome, if a sale in 2025 or 2026 is desired. “Put me in coach, I am ready to play today” https://youtu.be/Xq3hEMUeBGQ?si=04t_gW4SZyHWCSzB
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, legal, accounting, banking, and wealth management communities on subjects relevant to the purchase & sale of privately held companies and family businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.