What is an M&A Broker?

In the field of investment, a broker is a key figure, but not everyone understands why he is needed, and there are a lot of myths around this concept. Let's figure out who a broker is and what he does.

The role of business broker in M&A deals

Today, as never before, the number of M&A deals is declining, and the failure rate remains high. Such business deals require new approaches and modern solutions. And one such approach is a business broker service. So, how does it work?

The work of an M&A broker is quite specific. He specializes in large objects, the task is to bring the buyer and seller of a ready-made business together. The M&A broker is an intermediary that facilitates the implementation of agreements between stakeholders. He takes into account the interests of each party to the transaction, searches for a business that is currently being sold, evaluates it, and accompanies the process of buying and selling an enterprise at all its stages. For their services, the intermediary takes a commission in the form of a percentage of the transaction.

The responsibilities of the broker in M&A transactions include:

  • conducting financial analysis of the business;
  • analysis of economic activity;
  • audit and inventory;
  • reviewing tax and financial statements for the last three years at its discretion.

The mediator facilitates the interaction of the parties to implement the mechanism developed by them to implement the agreement. The participation of the broker in concluding and revising the terms of contracts can be multifaceted and allows to bring negotiations to a qualitatively new level. This is achieved due to the neutral position of the mediator. It allows him to see the negotiation process from the side and contributes to its effectiveness.

It should be added that the conditions for successful mediation during the conclusion of the agreement are confidentiality, trust of both parties in the mediator and he has adequate negotiation skills and experience.

Basic tasks of the M&A broker

During the preparation of the M&A agreement, the broker helps to assess the chances of successful negotiations to attract significant resources without the parties fully disclosing their goals and situations. In the course of the agreement, such mediation allows:

  • Determine the most effective order of negotiations without the need to subject one party to the conditions of another.
  • Help the representatives of the parties to focus on protecting the interests of the client, as the mediator takes care of the conclusion of the agreement.
  • Improve the communication capabilities of the parties to the agreement.
  • Overcome common mistrust and misunderstandings and protect the parties from unnecessary emotions, equipping them with the technique of constructive communication.
  • Prevent the discussion from turning into a dispute.
  • Determine why the negotiations stalled and overcome the stalemate.
  • Facilitate the achievement of consensus between the parties and provide them with a mechanism for resolving possible differences.
  • Plan and structure an order of interaction that will stand the test of time.
  • Avoid difficulties in drawing up the terms of the agreement caused by the conflict of lawyers of the parties.

After concluding the agreement, the mediation process is designed to adapt its terms to market changes or to extend the agreement on new terms. He fixes the possible options for the agreement, offers creative hypothetical solutions for discussion, and points out the available options for compromise. He helps to draw up a neutral draft agreement as a starting point for negotiations.