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CHOOSING THE RIGHT BROKER
For CEOs of small companies, locating any number of brokers or finders is rarely a problem. When the market (in a given industry) is strong, a business owner can expect to get hit up quite frequently by a finder or broker. In fact, they can get downright pesky.
As in life in general, a large percentage of contacts between sellers and brokers are made via word of mouth, especially in smaller deals. Firms that have brokered a lot of deals in a particular industry gain renown and a well-known reputation. But even if a broker comes highly recommended, you still owe it to yourself to conduct a full interview and of course draw up a full contract. You never know -- the firm might have recently lost its best professional, the one who had been chiefly responsible for its stellar reputation.
Brokers often specialize in particular niches, such as high tech, auto dealerships, and so on. There's no question that it's a good idea to go with a firm that knows your market inside and out. Even though all M&A transactions are fundamentally similar, nuances can be very significant. A broker's knowledge of your particular industry's unique aspects -- such as changes in state regulations or valuation metrics -- will be critical for the success of your deal.
If you must choose among several good firms with excellent reputations, the deciding factor is likely to be personal chemistry. One personality trait to watch out for is pushiness. You don't want to hire a broker that uses high-pressure tactics on you. Brokers have a reputation for being pushy characters, but this can hinder a deal. While you obviously wouldn't want to retain a wishy-washy broker, there's a fine line between persistence and overaggressiveness. A good broker should know how to toe that line, particularly in his initial dealings with you -- a prospective client.
