How to Choose an M&A Advisor or Business Broker

I've been on both sides of this equation — as an advisor representing sellers, and as a buyer evaluating businesses brought to market by every type of intermediary imaginable. The quality gap between a good advisor and a bad one isn't incremental. It's the difference between a competitive process that drives premium pricing and a listing that sits for 18 months before selling at a discount.

Choosing the right intermediary is the single most consequential decision you'll make in the sale process — more impactful than any operational improvement or financial restructuring. Here's how to think about it.

Business Broker vs. M&A Advisor vs. Investment Banker

These terms get thrown around interchangeably, but they describe fundamentally different service models. Understanding the distinction will save you from hiring the wrong person.

Business brokersoperate like commercial real estate agents. They list your business on marketplaces (BizBuySell, BusinessesForSale.com), field inbound inquiries, and facilitate a transaction between a willing buyer and willing seller. Most handle businesses valued at $500K to $5M. They typically carry 15-30 active listings simultaneously, which means no single deal gets deep attention. The model works — it's how most Main Street businesses change hands.

M&A advisors (also called intermediaries or middle-market investment bankers) run a proactive sell-side process. They identify and contact potential buyers directly, create competition, manage due diligence, and negotiate terms. They carry 4-8 active engagements and dedicate significantly more time per deal. Most focus on businesses valued at $5M to $100M.

Investment banks(bulge bracket and middle-market) handle the largest transactions — typically $50M and above. They bring institutional credibility, deep buyer relationships, and sophisticated financial modeling. For businesses under $25M in enterprise value, they're overkill and often won't take the engagement.

Fee Structures: What You'll Actually Pay

This is where sellers get confused — and where bad intermediaries exploit that confusion.

The Lehman Formula

The classic investment banking fee structure: 5% of the first $1M, 4% of the second $1M, 3% of the third $1M, 2% of the fourth $1M, and 1% of everything above $4M. On a $10M deal, that's $150,000 + $40,000 + $30,000 + $20,000 + $60,000 = $300,000, or 3% of the total. The original Lehman formula dates to the 1960s and is almost never used today — the numbers are too small for the work involved.

Double Lehman

Exactly what it sounds like — double the percentages. 10% of the first $1M, 8% of the second, and so on. More common in the lower middle market ($5-25M deals). On a $10M deal, this yields roughly $600,000 or 6%.

Flat Percentage

Many M&A advisors have moved to a simple flat percentage — typically 3-6% depending on deal size, with a minimum fee of $150,000-$250,000. I prefer this model for its transparency. You know exactly what you're paying, and there's no confusion about the math.

Retainer + Success Fee

The model I recommend for sellers: a modest monthly retainer ($5,000-$15,000) that demonstrates commitment from both sides, plus a success fee at closing. The retainer is usually credited against the success fee, so it's not additional cost — it's an advance. The retainer ensures the advisor is investing real resources in your deal, not just listing it and hoping.

Red Flags That Should Disqualify an Advisor

Having evaluated dozens of advisory firms on behalf of sellers, these are the warning signs I've learned to spot immediately.

No retainer whatsoever. If an intermediary doesn't ask for any retainer, they're running a volume business. They're listing 25+ businesses, putting them on marketplaces, and hoping one of the inquiries turns into a deal. Your business deserves more than a listing and a prayer. For deals over $3M, a retainer signals that the advisor will dedicate real resources to your process.

An inflated valuation to win the engagement. This is the oldest trick in the book. The advisor tells you your $5M business is worth $8M, you're thrilled, you sign the engagement letter. Then the business sits on the market for 12 months, you get frustrated, and eventually accept a $4.5M offer — less than you would have gotten in a properly priced, competitive process. In my experience, the advisor who gives you the highest valuation is almost never the one who gets you the highest price. A credible advisor will show you comparable transaction data and give you a realistic range.

No industry specialization. An advisor who sold a plumbing company last month and a SaaS business this month doesn't have deep buyer relationships in either industry. The best outcomes come from advisors who know the specific buyers in your space — the strategics, the PE platforms, the family offices with sector mandates.

They can't name recent closed transactions. Ask for 5 deals they've closed in the last 24 months with references from sellers. If they can't produce this, they either don't close deals or their clients aren't willing to vouch for them. Both are disqualifying.

Dual representation. Some brokers represent both buyer and seller in the same transaction. This is legal in most states but creates an inherent conflict of interest. Your advisor should represent you and only you. Full stop.

The Competitive Process Advantage

The single biggest value an M&A advisor provides isn't valuation expertise or negotiation skill — it's creating competition. A well-run process contacts 50-150 potential buyers, generates 10-20 signed NDAs, produces 3-5 indications of interest, and results in 2-3 formal offers. That competition is what drives premium pricing.

I've seen the same business receive offers ranging from 4x EBITDA to 7x EBITDA in the same process — a spread of $2-3M on a business earning $1M. Without competition, you'd have taken the 4x and thought you did well. With three buyers at the table, you close at 6.5x because no one wants to lose the deal.

This is why the advisor's fee — even at 5% — almost always pays for itself. A 5% fee on a $10M deal is $500,000. But if the competitive process adds even one turn of EBITDA to the price, that's $1M+ in additional value. The math isn't close.

Evaluating Track Record: What to Ask

When interviewing M&A advisors, go beyond the glossy pitch deck. Here are the questions that actually reveal competence:

• "How many deals did you close in the last 12 months, and how many did you take to market?" A close rate below 60% suggests they're taking on deals they can't sell — often because they inflated the valuation to win the mandate.
• "What was your average deal timeline from engagement to close?" Expect 6-9 months for a well-run lower middle market process. If they're saying 3-4 months, they're either exceptional or misleading you.
• "Can I speak with 3 sellers from your last 5 closed deals?" Not cherry-picked references from 2019 — recent sellers from recent deals.
• "Who specifically will work on my deal?" You want to know the day-to-day team, not just the senior partner who pitches but never returns calls after you sign.
• "How many buyers will you contact, and can I see a sample buyer list?" A serious advisor will have a preliminary buyer universe before you engage them.

The Engagement Letter: Provisions That Matter

Before you sign anything, pay attention to these critical terms.

Exclusivity period. Most advisors want 12 months of exclusivity. That's reasonable for a middle-market deal. Be cautious of 18-24 month terms — that's too long to be locked in with an advisor who isn't performing. Negotiate a 6-month performance check or a termination clause with 30-60 days' notice.

The tail provision. This is the clause most sellers overlook. It says that if you sell your business to anyone the advisor introduced — even after the engagement ends — you owe them the success fee. Typical tails run 18-24 months. That's fair. But I've seen tails of 36+ months and tails that cover "any buyer" regardless of whether the advisor made the introduction. Negotiate the tail down to 12-18 months and ensure it only applies to specifically named parties the advisor contacted.

Fee on total enterprise value vs. equity value. Make sure you understand what the success fee applies to. On a $10M enterprise value deal with $3M in debt, the equity to the seller is $7M. A fee on enterprise value ($500K at 5%) is very different from a fee on equity value ($350K at 5%). Clarify this before you sign.

When to DIY (and When Not To)

Not every business needs an advisor. If you're selling a $1M business and the buyer is your longtime general manager, an M&A attorney can handle the paperwork for $15,000-$30,000. If a strategic acquirer approaches you unsolicited and makes a compelling offer, a skilled M&A attorney plus a quality of earnings report may be sufficient.

But if your business is worth $3M or more and you don't have a buyer in hand, hire a professional. The competitive process advantage alone will more than cover the fee. And the complexity of preparing for sale, managing buyer communications, negotiating terms, and shepherding due diligence to close is a full-time job that most owners can't do while also running their business.

The Bottom Line

The right advisor will earn their fee many times over. The wrong advisor will cost you more than their fee in missed opportunities, drawn-out timelines, and failed processes that leave you burned out and your business exposed. Interview at least three firms. Check references aggressively. And remember: the advisor who promises you the highest price is usually not the one who delivers it.