Be sure to check out part four of my M&A best practices series for Vending Market Watch. In the article, we discuss negotiation – an important role for a business intermediary. One thing you can count on from VBB Advisors, we will never be representing both sides of the table, for reasons that should be obvious to any operator. One big reason is that negotiation becomes non-existent.
When a business broker represents both sides in a transaction, it’s often referred to as a “two- party” relationship. As the leading sell-side broker in the convenience services business, I think two-party relationships should never happen. That is why we represent sellers exclusively.
The immediate impact of a two-party relationship is that the business broker’s objective changes from representing the seller and getting the best possible deal for the seller, to just getting a deal done. When you are selling your business, accomplishing what is probably the most important deal of your life, you want, need and deserve more than just getting a deal done. You want the best possible price, along with the terms and conditions of the sale that meet your needs.
There are numerous other issues to be concerned about with a two-party relationship:
An obvious conflict of interest
The buyer wants the lowest possible price, while the seller wants the highest. A two-party broker sets up a winner and a loser scenario. Sometimes I hear a broker say that to make a deal, both sides need to feel some pain. Forget about that concept. When you are represented by VBB Advisors, there’s no pain in the plan. In fact, selling your business will be an exciting and energizing experience.
A change in priority
At VBB Advisors, our priority is serving the best interests of the buyer. A two-party broker is in a difficult position in that regard – an impossible position. How is it possible to serve the best interests of both parties? The priority changes to moving the deal along as quickly as possible.
Inability to control the emotional attachment
Sellers often get attached to their business. It is what they have known as the center of their professional life for years, sometimes decades. When negotiations occur, that emotional attachment needs to be unknown to the buyer or it becomes a clear vulnerability for the seller. Again, the two-party broker will be biased because of the knowledge they have of the seller’s emotional attachment to the business. The seller needs to separate emotion from the transaction.
A breach of personal knowledge
An important part of our process at VBB Advisors is to learn as much as we can about the seller, early in the process. What is their financial position? What are their plans for their next chapter. Is the sale happening because of a health issue – a family issue – a financial issue? Knowing this information is sure to influence the two-party broker. If the seller really needs to sell, for whatever reason, that information needs to be kept from the buyer. That information gives leverage to the buyer and if revealed by the two-party broker to the buyer, it can only lower the price.
Multiple offer avoidance
When one broker is representing both parties, the concept of multiple offers goes out the window. Once the two-party broker is locked in with a seller and a buyer, it is very unlikely that they will be focused on bringing in a second or third buyer. After all, the two-party broker wants to get the deal done quickly, not to complicate things. Consider this: A two-party broker may need to negotiate commission arrangements with each potential buyer that is involved in the deal, if there are going to be multiple offers. Will one potential buyer offer a higher commission? Even worse, is the buyer paying more commission than the seller? Talk about a serious conflict of interest!
One of the keys to successful representation is generating multiple offers. Our process at VBB Advisors is built around that concept.
Is the broker looking ahead?
Can it get any worse? Consider this: If the two-party broker is hoping to do many more deals down the line with the buyer, will that broker be inclined to favor the buyer and be primarily concerned with the happiness of the buyer? After all, an operator who sells is usually selling once. An active buyer can be buying a different company every month. This is a mess you can and should avoid.
One of the keys to successful representation is generating multiple offers. Our process at VBB Advisors is built around that concept. Are you ready to take that critical first step? That is often the toughest one to take.
Order my free 2025 Exit Strategy Planner. At the very least, it will provoke some thought, and this is a good time to think about your future.
Whatever your reasons are to sell your company - the timing, a sense of frustration, the desire to enjoy life or an interest in rewarding yourself for years of hard work – VBB Advisors can help you realize your goals.
I am Mike Kelner, the leading sell side intermediary in the convenience services industry. Let’s sit down and have a conversation. Use this appointment scheduler to set up a meeting with me.
Or – give me a call at 704-942-4621
