The Purpose of an Intermediary in an M&A Deal
An intermediary is a person who represents Buyer or Seller in an M&A transaction. Commonly called investment bankers or business brokers, this breed of M&A advisors is essentially salespeople, and what they’re selling is a company.
The intermediary is often the quarterback during the M&A process, and Buyers or Sellers thinking about hiring an intermediary should look for deal experience, demeanor, confidence, business understanding, creativity, and accounting skills when hiring that quarterback.
For Seller, an intermediary is the one who helps execute the M&A process, including contacting buyers, structuring the deal, and performing due diligence.
The intermediary can also be the voice of reason for an otherwise-emotional Seller. The business sale is likely to be the largest transaction of Seller’s life, and he needs someone who isn’t emotionally tied to the business to represent him. (That’s why Sellers should never represent themselves in a sale.)
For Buyer, an intermediary is the one who does the most difficult of jobs: contacting Sellers and getting the appropriate information for Buyer’s offering document and due diligence. Depending on the needs of the client, the intermediary may also help with the negotiating and structuring of a deal, although many Buyers who utilize an intermediary for help with finding targets prefer to do the negotiating and structuring themselves.
Most Buyers (and their advisors) these days review the copious amounts of data generated by due diligence in a secure, online data room, so when hiring an intermediary, make sure that person is well versed in online data rooms.
What the intermediary doesn’t do is hammer out all the details of the purchase agreement (that’s for the lawyers) or go through all the books in order to perform a comprehensive financial analysis (that’s the job of the accountants).
Buyers should note that Sellers are usually extremely reluctant to speak to a competitor or a company they perceive as a competitor. For that reason, using an intermediary can be a very useful buffer when contacting Sellers. A Seller is more apt to talk with an intermediary and quite often more willing to open up and provide quite a bit of information.