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Should I Hire An Investment Banker, M&A Advisor, or Business Broker?

There comes a time in the life of every entrepreneur when a business transition is an inevitable reality. When this time comes, there are plenty of questions that need to be answered, such as:

• What is the valuation of the business?
• What is the timing for the business sale?
• Should a succession planner be hired to increase the company’s value prior to the sale?

The key to maximizing the value of your business lies in choosing the right advisor—whether that’s an investment banker, M&A advisor, or business broker. But which is the right move?

Understand Your Options: Investment Banker vs. M&A Advisor vs. Business Broker

When you’re selling your business, picking the right advisors is one of the biggest decisions you’ll make. The differences between an investment banker, an M&A advisor, and a business broker isn’t just about titles—it’s about the level of expertise, the size of deals they handle, and the strategic insight they offer for that context to help you achieve your ideal outcome.

Role	Transaction Size	Objective	Specialization
Investment Bankers	High-stakes, complex deals; EBITDA > $5M	Maximize value via deal structuring, competitive bidding	Large transactions; licensed for securities work; strong investor relations
M&A Advisors	Mid-market deals; Revenues $10-20M; Earnings $1-2M	Provide insights and coordination, strategic partnerships	Mid-sized companies; some financing arrangements; not typically securities licensed
Business Brokers	Small businesses; typically valued < $10M	Facilitate straightforward transactions	Small, owner-operated businesses; cost-effective buyer matching

Investment Bankers:

• Transaction size: High-stakes, complex deals involving businesses with EBITDA above $5 million (sometimes as low as $3 million).
• Objective: Maximize value through sophisticated deal structuring, competitive bidding, and leveraging relationships with institutional investors.
• Specialization: Ideal for large transactions where securing the highest possible price and best terms is critical. Often licensed to do securities work, and maintain relationships with institutional investors, as well as with debt and equity players.

M&A Advisors:

• Transaction size: Middle-market companies that are larger than what business brokers handle but smaller than those needing full-scale investment banking services. Typically revenues of $10-20 million and earnings of $1-2 million/year.
• Objective: Provide valuable insights and coordination, particularly in transactions requiring strategic partnerships or targeted buyer outreach.
• Specialization: Suitable for mid-sized companies where strategic advice and detailed coordination are key. An M&A advisor may serve the role of arranging some financing, but most are not securities licensed so therefore consult with the owner to arrange financing.

Business Brokers:

• Transaction size: Small, owner-operated businesses typically valued under $10 million.
• Objective: Facilitate straightforward transactions, often for local shops, restaurants, or small service providers.
• Specialization: Best for small businesses seeking cost-effective services for finding buyers closely tied to the ownership structure. Many business brokers are like commercial real estate agents, working with companies that own main street businesses.

The right advisor can mean the difference between a smooth transaction that meets your financial goals and a missed opportunity. The size of your business, the complexity of the transaction, and your long-term objectives should all play a role in determining which type of advisor you need.

Let’s take a closer look at why an investment banker is so valuable for companies of a certain size.

The Importance of an Investment Banker in an M&A Transaction

Sellers who engage top-tier investment banks see even higher premiums. The increase in acquisition premiums for these sellers can be as much as 40% to 59% compared to those who hire lower-tier advisers

Selling a business is often the culmination of a lifetime of work—it’s personal, it’s emotional, and it’s incredibly complex. This is where the expertise of an investment banker becomes invaluable. With decades of experience navigating the intricate world of M&A, investment bankers are uniquely positioned to guide you through this pivotal moment.

Experience matters

CEOs and entrepreneurs may be experts in running their businesses, but when it comes to selling, they’re often stepping into uncharted territory. Investment bankers bring a wealth of experience from handling numerous transactions across various industries, giving us a deep understanding of market dynamics, buyer psychology, and deal structuring.

This experience allows investment bankers to anticipate challenges, mitigate risks, and secure the best possible terms for clients.

Access to buyers

One of the key advantages of working with an investment banker is our access to a vast network of potential buyers and investors. This isn’t just about having a long contact list—it’s about knowing who the serious players are in your industry, who’s actively looking to acquire, and who might be willing to pay a premium for a strategic acquisition.

By leveraging these relationships, investment bankers can generate competition among bidders, driving up the sale price and ensuring you get the best possible outcome.

Objective advice

Selling your business is not just a financial transaction—it’s an emotional one. For most entrepreneurs, preparing for an exit means you’ve already put in a whole lot of blood, sweat, and tears to get your company where it is today. In short, it becomes difficult to stay objective.

Investment bankers provide you with the necessary emotional distance, helping you see the bigger picture, and focusing on long-term goals rather than getting caught up in the emotional aspects of the sale. This objectivity is critical in making decisions that are in your best interest, ensuring that you exit the business on your terms and at the right price.

Read more: How to select your investment bank or investment banker

What to Expect Working When with an Investment Banker

Let’s break down the role of an investment banker into concrete steps, so you can understand exactly what to expect and why our involvement is so critical to the success of your transaction.

1. Valuation: The first step is accurately valuing the business (we recommend annual valuations for a multitude of reasons). This involves analyzing financials, market trends, and strategic factors to determine a realistic and competitive price.
2. Marketing and Outreach: Investment bankers create detailed marketing materials (like pitch books) that highlight the business’s strengths and potential. They then leverage their networks to reach out to targeted buyers or investors who are likely to see the business’s value.
3. Negotiation: During negotiations, investment bankers focus on maximizing the sale price and securing favorable terms. They manage competitive bidding processes, structuring deals to meet the seller’s financial and strategic goals.
4. Closing the Deal: Investment bankers coordinate with legal and financial advisors to ensure a smooth transaction. They handle final negotiations, address any last-minute issues, and guide both parties through to a successful close.

In each of these steps, the goal is the same: to maximize the value of your business and to ensure that your sale is executed with precision and professionalism.

Selling your business is a complex, multi-faceted process, but with the right investment banker by your side, you can navigate it with confidence and achieve an outcome that truly reflects the worth of your hard work.

To get a better understanding of your options and make sure you get the right people involved, get in touch with us at Merit. We’ll help you assess your situation, see the full scope of your options, and decide on the right path forward for your business. Book a discovery call to learn more.