The essential middleman: Why a broker can be a smart move when you want to buy or sell a business
Peter Goodman, president of Goodman & Co. Business Brokers, Sudbury, said sellers benefit from brokers’ expertise.
Christopher George,
of George & Co., Worcester: Experience and trust count.
For the past two years, Hudson-based ResTech Plastic Molding has been on a buying spree, gobbling up three fellow manufacturers in Connecticut and Pennsylvania and looking at more potential deals down the line.
CEO George E. Ganis said ResTech organized and executed one of the acquisitions on its own, without the help of a business broker. But with the other company, it took 25 meetings spanning a year and a half to get the deal done. Over that time, Ganis got to know the owners of the other company, trust their honesty, and understand their needs.
Without that kind of long-term relationship building, Ganis said, he'd always use a business broker to help negotiate an acquisition.
“There's a great value, especially if you don't know all the parties,” he said. “The broker is a mediator.”
Ganis said his company works with a broker that focuses specifically on the world of plastic injection-molding. With lots of independent factory owners having reached an age when they're looking to retire, and others simply hoping to get out of what can be a rough market, the broker can find opportunities that seem right for ResTech, bring them to the company's attention, and — if they look good — help make the deals happen.
Just like a real estate agent who helps buy or sell a house, a business broker is a significant expense. But there's a reason they get hired: They have expertise that someone who needs to spend the vast majority of their time running a business doesn't.
“Using a broker almost always gets a seller a higher price for their business and better terms,” said Peter Goodman, president of Goodman & Co. Business Brokers in Sudbury.
Goodman said one of the major services a broker provides to a seller is confidentiality. Brokers can find multiple potential buyers for a company while keeping them anonymous, ensuring that customers and employees won't know about the planned sale until the owner wants them to. A broker can also delve into the financial costs and benefits of an acquisition in ways a buyer or seller may not be equipped to do themselves, helping the two sides reach a price that reflects the company's true value.
Elaine Key, former owner of UID Labels in Princeton, said that when she decided to sell the company and join her husband in retirement, she started off trying to find a buyer herself. She knew she had something valuable to offer, including a strong customer list and a desirable web address. But when she approached some of her competitors, she found they didn't want to spend the money she expected.
That's when she approached a business broker, Neil Gould of Holden. He assembled a marketing brochure and expanded the field of potential buyers Key was looking at.
“He got the exposure I needed,” she said. “He had the contacts.”
Good time for brokers?
Christopher George, president and CEO of Worcester-based George & Company, said it's an interesting time to be a broker. Private equity firms these days are flush with cash and under pressure from investors to use the money. George said he gets half a dozen inquires a day from firms looking for opportunities.
“That's how much demand there is in private equity right now to get that money invested so they don't have to return their funds to their investors,” he said.
Some firms that previously wouldn't have touched a business with less than $5 million a year in earnings are now going for companies in the $2 million or even $1 million range.
George said his brokerage, which has a division devoted to smaller mom-and-pop businesses as well as a mergers-and-acquisitions arm, provides some of its value through decades of experience and the trust it's earned from the business community.
“Most of the buyers out there know that we don't play games,” he said. “We know what the market is paying for businesses.”
The value of certification
Of course, not all brokers have the same abilities. George said some people enter the market just looking to make easy money. He recommends that buyers and sellers look for a broker who, at a minimum, is a member of the New England Business Brokers Association. Beyond that, he said, it's valuable for brokers to have credentials documenting their experience and education, such as the Certified Business Intermediary designation from the International Business Brokers Association. Another thing to look for: the length of tenure of a brokerage's staff, he said.
Key said she'd also recommend that anyone looking to sell a business, as she did, should shop around for a brokerage that fits their needs. She said some people she spoke with weren't interested in, or didn't have an appropriate fee structure for, a small business like hers.
Once she found the right broker, Key said she was able to get the price she wanted for her company. Now she's done with the long hours of building a small business and enjoying the fruits of her labor in retirement.
“We're traveling a lot,” she said.
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