Working With Business Brokers In Complex Transactions
Business brokers provide a necessary and helpful service in connecting buyers and sellers. They also help with valuation and preparing a business for sale. However, a broker does not replace a lawyer in a deal. It is in the best interests of each party to have legal counsel to advocate for and protect their interests.
At AEGIS Law, we represent buyers and sellers. With over 25 years of experience, we can prepare a wide array of contracts, form buying entities, advise on partnership, operating or shareholder agreements, negotiate the transaction and confirm the assets acquired are free and clear of liens and encumbrances. We advise on hiring an appropriate broker and protecting your interests throughout the transaction.
The Importance Of Hiring An Experienced Broker
Brokers should be experienced in business transactions, not just real estate transactions. It is particularly helpful to find a broker with experience in your industry. If your business has a significant amount of intellectual property or is primarily an internet-based business, it will be important to work with a broker, and lawyer with experience in dealing with the transfer of domains, Amazon*, EBay*, Google Ad Words* and other similar accounts. Knowledge about structuring the deal in these situations is key to successfully maintaining Search Engine Optimization (SEO) and account status. *We are not affiliated with Amazon, EBay or Google and only using these names as reference points.
In addition, it is important that the broker have the know-how to read your financial statements and help you normalize the business for predicative modeling. Essentially, small businesses with a long-term owner often have a combination of business and personal expenses paid for by the business. A buyer may need to add professional management or eliminate certain personal expenses of the seller to project profits as the new owner.
An experienced broker will be able to assist in understanding the financials and helping both the buyer and seller look at current and future value. Keep in mind that business brokers may or may not be licensed professionals. In Florida, a business broker must be licensed as a real estate broker.
Questions To Ask Prior To Hiring A Broker
Before hiring a broker, we recommend that before selecting a business broker, whether you are a seller or buyer that you ask and consider the following:
- How long has the individual worked as a business broker?
- What is his or her prior experience?
- Does the broker have specific experience in your industry and with transactions of the size and type you are considering?
- How many transactions has your broker closed in the last 12 months, 18 months and 24 months?
- Does the broker’s listing agreement provide for exclusivity and if so, for how long?
- What happens if you sell the business after the broker’s contract terminates? Does the broker still get a fee? And if so, for how long?
- What happens if you sell to someone you find? Does the broker get a fee? What if you sell to an employee or friend or family member?
- What are the broker’s specific duties?
- How will you list the business and where?
- Have you seen and approved the confidentiality agreement/non-disclosure agreement?
It is important to carefully read the brokerage agreements so that you understand your obligations and rights. We recommend engaging an attorney early in the process, before hiring a broker. The attorney can be on standby to answer your questions and work in your best interest while the broker works hard to find the best match for the opportunity.