Oh come on. I’m a
good generalist M&A broker, so of course I’m going to say the good
generalist broker is better! I
kid. As usual, the answer is: “It
depends”. All things being equal, as a business owner I might go with a specialist. Often, however,
things are not equal.
First, some background.
A generalist business broker or mergers and acquisitions firm is one
that will sell just about anything. For
some industries there are specialists that focus on selling businesses in just
that industry. For example, these are
industries where it is common to find specialists. I’m sure there are many more:
Often the specialists came from that industry. For example, I know of some medical business
brokers that are retired doctors.
The good points about a specialist:
may have contacts in that industry, and one good contact is all it
can talk the talk. As many of you
well know, often there is almost a separate language spoken within an
know all the “rules of thumb” for that industry, and often can value a
business by the seat of their pants calculations.
The flip side of these benefits:
a few phone calls the industry specialist’s contacts are exhausted, and
often they don’t have the broad base advertising strategies (and funds) to go much further
than that. In addition, often you don’t want to sell to someone
inside your industry, since it is common for someone outside the industry
to pay more than someone inside.
my experience, talking the talk is only important for some
individuals. A generalist will try
hard to educate themselves on the important terms and issues, and that is
usually sufficient. The business
owner usually gets involved for the serious nuts and bolts talk about the
industry norms are sometimes just plain wrong, and some specialists don’t
have the financial training to go further than a rule of thumb. For
example, a retired veterinarian business broker may value a large animal
clinic at .85 times annual revenue, using a rule of thumb long used in the
industry. But it really depends on
earnings and a clinic may have other factors that mean you can’t employ a “rule of thumb” valuation for that particular business.
My partner Fred Hall once did a valuation for a
pharmacy. He did it for free in order to
try to get the owner to use him to sell the business. The business owner elected to use a company
pharmacies, but after six months of no activity the owner came back to Fred and
Fred sold the business. It also turns
out that the pharmacy broker was using Fred’s valuation package to market the
business. So obviously in this case the
specialist was not able to deliver – or even do his own work.
Another one of my partners, Graeme Plant, sold his business years ago using a
technology industry specialist, and he says the contacts and knowledge this
firm had was very beneficial and led to a lucrative sale. So it goes
both ways – and the answer is “it
depends”. As always, do your research