The Market and the Players

In 1974, when Robbinex Founder and President Doug Robbins commenced his practice of selling businesses, there was no one practicing business brokerage. The only people actively engaged in selling businesses were a few Real Estate Brokers and of course, stock brokers.

In many jurisdictions, in order to sell a business, one needed to be licensed under that jurisdiction’s Real Estate Act. There are 17 States in the U.S. and all Provinces in Canada that require registration under their Real Estate Act.

Business Brokers are defined as those people who represent the sale of a business much the same as a realtor represents the sale of real estate. Much of the rationale for licensing is that the business being sold operates from real estate either through ownership or lease/rental agreement, and as such the real estate license is a requirement.

The business brokerage market is broken down into three main areas primarily by size of the transaction or enterprise value:

• MainStreet businesses            $50,000 to $1,500,000
• Mid-Market businesses            $750,000 to $25,000,000
• Large businesses                    $15,000,000 to unlimited $

The first thing to note is that there is a fair amount of overlap between the sizes. This has a great deal to do with the complexity and type of transaction.

For example, a small Hi-Tech software firm could be sold as a stock sale and be quite complex, whereas the sale of a motel could be a simple asset real estate transaction and be worth a couple of million dollars. The skills of a business broker would be needed for the Hi-Tech transaction, but a realtor could handle the sale of the motel.

There are numerous players in the business of selling businesses.

• Business Brokers
• Real estate brokers
• I-bankers
• Consultants
• Lawyers & Accountants
• Business Intermediaries

Business Brokers, for the most part, spend the majority of their business life selling business in the market known as MainStreet. During the 25 years, there has been rapid growth in this market area of the profession. Numerous associations have been founded, the most notable being the International Business Broker’s Association, currently boasting a membership in excess of 2,000 members, mostly in the USA and Canada.

There are dozens of local chapters of the International Business Broker’s Association, throughout North America. The principal focus of these Business Broker’s associations is education. The International Business Broker’s Association has more than 42 one-day courses that, upon successful completion, support the granting of a certificate of competency, known as a CBI (Certified Business Intermediary). There are now over 550 business brokers with their CBI.

There are numerous franchised business brokers, the most notable being Sunbelt Business Brokers, and VR Business Brokers. Both organizations offer some training to their franchisees, and rely on the International Business Broker’s Association for continuing education.

Real Estate Brokers seldom become too involved in selling businesses and generally only become involved when a business is owned by a friend or client. Most realtors shy away from the complexities of selling a business and will refer a client to a competent Business Broker. There are some large commercial real estate brokerages that are now establishing a business brokerage operation.

I-bankers and Consultants are usually not licensed by a governing authority (in many jurisdictions, is not required), and will usually represent businesses on a retainer coupled with a finder’s fee. They will accept assignments covering the full spectrum of sizes depending on their experience. These consultants, for the most part, generally only stay in the profession for a relatively short period of time (18 to 30 months) before moving into some other field.

Lawyers and Accountants will eagerly assist clients in the sale of their businesses and generally charge fees on an hourly basis.

Business Intermediaries are usually highly trained professionals many of which have spent time in MainStreet selling smaller business as a business broker, who now focus on the Mid-Market. There are also numerous associations that they belong to:

• The M&A Source: (affiliated with the International Business Broker’s Association) there are currently over 200 members, who can earn the coveted designation M&AMI (Merger & Acquisition Master Intermediary) through a combination of courses and experience.

• The Institute of Certified Business Counselors: (this is one of the oldest associations) there are currently over 125 members and members can earn a designation CBC (Certified Business Counselor).

• The Alliance of Merger and Acquisition Advisors: There are approximately 200 members, with many who are public accountants interested in specializing in the sale of businesses. There are also a large number of members from the International Business Broker’s Association who have joined to further their education and networks. Extensive training courses are available form the AM&AA for which the designation CM&A is granted (Certified in Merger & Acquisitions)

• Another popular networking organization for intermediaries to join is the ACG (Association for Corporate Growth) and it has numerous chapters throughout the US and Canada.

Larger companies are usually represented by stock brokerage houses, and  M&A departments in chartered banks.