Business Broker vs M&A Advisor: Which Do You Need?

A business broker typically sells small, owner-run businesses, often worth less than about €2 million, mostly to individual buyers who find them through listings. An M&A advisor typically sells larger companies, often from about €5 million upwards, to strategic buyers and investment funds through a confidential process with full documentation. Brokers usually value a business on the owner's earnings, advisors on adjusted EBITDA and comparable transactions. These thresholds are rough guides that vary by market and firm, not fixed rules. The right choice depends on three things: the size of the company, the type of buyer most likely to pay the best price, and how much preparation the sale needs.

Two different markets

Brokers and M&A advisors both help owners sell, but they work in different markets with different buyers. A broker's typical buyer is a person looking for a business to own and run: a shop, a restaurant, a local service company. An M&A advisor's typical buyer is an organisation: a company expanding into a new market, a competitor adding capacity, or a fund investing on behalf of its own investors.

These buyers behave differently. Individuals browse marketplaces and respond to listings. Companies and funds may also use deal platforms, but they rely more on opportunities brought to them directly; they ask for detailed information under confidentiality and run their own due diligence with lawyers and accountants. The intermediary has to fit the buyer.

The main differences

Thresholds vary by market and firm. Sources: Benchmark International, Axial, Website Closers, Firmex.

Valuation: owner's earnings or EBITDA

The two worlds also measure value differently, and this alone can change the price by a large amount.

Seller's discretionary earnings (SDE) is the measure used for small businesses. It starts from pre-tax profit and adds back one owner's salary and personal benefits, interest, depreciation and agreed one-off items, because the buyer will usually replace the owner and work in the business. The adjustments are negotiated and documented; SDE is not the same as net profit. Small businesses typically sell for around two to three times SDE.

Adjusted EBITDA is the measure used for companies run by a management team. It is earnings before interest, taxes, depreciation and amortisation, normalised for one-off items, with a market salary for the managers. Mid-market companies sell for higher multiples, commonly four to eight times adjusted EBITDA, depending on industry, size and growth.

The higher multiple reflects lower risk: a company that runs without its owner, with diversified clients and audited accounts, is worth more per euro of earnings. Part of an M&A advisor's work is to present the company so that buyers value it on this basis.

How the process differs

A broker's process is designed for volume. The business is listed with a description and headline figures, enquiries are screened, interested buyers sign a confidentiality agreement and receive more detail, and negotiations proceed with whoever makes an acceptable offer. It works because many individual buyers are looking and small deals need less documentation.

An M&A advisor's process is designed for competition among a limited number of qualified buyers:

• Preparation of a valuation, an anonymous teaser and an information memorandum.
• A list of strategic buyers and funds, often in several countries, approached directly.
• Non-disclosure agreements before any identifying information is shared.
• Indicative offers by a deadline, management meetings with a shortlist, binding offers.
• Coordination of due diligence and negotiation of the purchase agreement with lawyers.

The goal is to have several buyers bidding at the same time, so the price and terms are set by competition rather than by the first offer.

Confidentiality

For a small business, a public listing is usually acceptable: the listing omits the name, and a local buyer pool is large. For a mid-sized company, a leak can be costly. Employees may leave, clients may hesitate to renew contracts, and competitors may use the news. M&A advisors therefore approach only selected buyers, share the company name only after a signed NDA, and release sensitive data such as client lists in stages, as the buyer's interest becomes firm.

Three examples

A café chain with €1.2 million revenue. The owner works in the business daily, the likely buyer is an individual or a local operator, and the value is a few hundred thousand euros. A broker is the right choice: a public listing reaches the right buyers, and an M&A process would cost more than it adds.

A logistics company with €15 million revenue and €3 million EBITDA. It has its own fleet, a management team and clients across several countries. The likely buyers are larger carriers, international logistics groups and funds, some of them abroad. An M&A advisor is the right choice: these buyers have to be approached directly, the deal will involve a share purchase agreement and due diligence, and competition among them can move the price significantly.

A manufacturing group worth €150 million. At this size, the transaction will attract large corporate buyers and major funds, and may require complex financing. An investment bank or the corporate finance division of an international firm usually leads such deals.

When a broker is the right choice

• The business is worth less than about €2 million.
• The owner works in the business daily and the buyer will replace them.
• The likely buyer is local and individual.
• The deal will be simple: mostly cash, few contracts to transfer.

When you need an M&A advisor

• Revenue is in the millions and there is a management team beyond the owner.
• The likely buyers are companies or funds, possibly in other countries.
• You are selling a stake rather than the whole company, or expect deferred payments.
• Confidentiality matters: clients, staff or competitors must not learn about the sale early.
• The company needs preparation: normalising earnings, organising documents, positioning.

What each option costs in euros

Percentages are misleading when deal sizes differ, so it helps to compare amounts:

Illustrative. Advisor rates are averages from Firmex, European M&A Fee Guide 2023-24. The broker column assumes a 10% commission for comparison only; actual broker commissions vary by country and deal size.

Below about €2 million, the broker's model is usually cheaper and better suited. Above about €5 million, a declining success fee makes the advisor cheaper in percentage terms, and the more structured process tends to increase the price itself.

The €2–5 million middle ground

Companies between about €2 million and €5 million fall between the two models. They are often too large and too complex for a public listing, yet small enough that a full M&A process with a large firm is expensive relative to the result.

For these companies, the deciding questions are practical. If the business depends on the owner and the natural buyer is a local entrepreneur, a broker or a small advisory boutique with a broker-like approach works. If the business has a management team, recurring clients and a likely buyer among larger companies or funds, a lean M&A process, with a teaser, an information memorandum and a targeted buyer list, pays for itself. Many boutique advisors work in exactly this range.

The market in South-East Europe

In Bulgaria, Romania, Serbia and neighbouring countries, the line between brokers and advisors is less clear than in Western Europe or the United States. Business-for-sale listing sites exist, and most of what they carry is small: shops, restaurants, small hotels, and company shells without activity. Mid-sized companies can use international deal platforms to reach buyers, but these work best combined with a direct, confidential approach to the international groups and regional funds most likely to buy.

At the other end, the large international advisory firms focus on transactions of tens of millions of euros and more. Owners of companies worth €3 million to €50 million therefore often need an advisor who combines local knowledge with access to foreign buyers, and who can prepare materials in English to the standard those buyers expect.

Questions to ask before you hire either

• Which comparable companies have you sold in the last three years, and at what size?
• Which buyers would you approach for my company, and in which countries?
• Who will work on my sale day to day?
• How do you keep the process confidential?
• How is your fee calculated, and what are the minimum fee, the tail period and the exclusivity terms?
• What do you need from me, and how much of my time will it take?

Be cautious with anyone who promises a price before seeing the numbers, asks for a large upfront fee without a clear plan, or cannot name buyers they would contact.

Questions and answers

Sources

• Benchmark International, What is the difference between an M&A advisor and a business broker
• Axial, Business broker vs M&A advisor
• Website Closers, Difference between business brokers and M&A advisors
• Iconic, How much is my business worth
• Firmex, European M&A Fee Guide 2023-24