What is the role of industry brokers and intermediaries in the search process?

Business brokers and M&A intermediaries play a complex and often controversial role in search fund acquisitions. These professionals represent sellers seeking to maximize sale prices and transaction certainty, creating both opportunities and challenges for searchers. Understanding how to work effectively with intermediaries while also pursuing direct-to-owner approaches defines successful search strategies. Business brokers typically handle smaller transactions (under €5 million enterprise value), listing companies on marketplaces, screening buyers, and facilitating negotiations for commission-based fees (usually 5-10% of transaction value paid by sellers). M&A advisors serve larger companies with more sophisticated processes including preparing information memoranda, running controlled auctions with multiple buyers, and providing valuation advisory. For searchers, broker-represented deals offer advantages including pre-packaged information with financial statements and business descriptions ready for review, seller commitment—owners who engage brokers demonstrate serious intent to sell, and administrative efficiency as brokers handle scheduling, documentation, and process management. However, significant disadvantages exist. Competition increases because brokers market businesses widely, driving up valuations. The best companies rarely need brokers—owners with desirable businesses receive inbound interest and can sell directly. Broker incentives misalign with buyer interests since they maximize price rather than ensuring fair value or good buyer-seller fit. Commission structures create pressure to close deals even when terms don't serve the searcher well. Many experienced searchers estimate that only 10-20% of their acquisitions come through brokers, with the majority resulting from direct outreach. The proprietary deal flow approach involves systematic direct contact with business owners, often before they've decided to sell. This requires patience building relationships over months or years, but yields better pricing (no competitive bidding), stronger rapport with sellers (personal relationships rather than transactional processes), and access to higher quality businesses that never reach the open market. When working with brokers, searchers should understand the process mechanics. Brokers send teasers (one-page anonymous company descriptions) to gauge interest. Interested buyers sign non-disclosure agreements (NDAs) to receive confidential information memoranda (CIMs) with detailed business information. Buyers submit indication of interest (IOI) letters outlining proposed valuation ranges and terms. Sellers select buyers for management presentations and facility tours. Buyers submit letters of intent (LOIs) proposing specific price and terms. The seller selects a buyer for exclusive negotiations and due diligence. Searchers must manage broker relationships strategically. Responding quickly to opportunities shows seriousness. Asking intelligent questions demonstrates competence. Being realistic about valuation maintains credibility—brokers remember buyers who waste time with lowball offers. However, searchers should never feel pressured to overpay simply because a broker creates artificial urgency. Some intermediaries specialize in search fund transactions, understanding the model and connecting searchers with appropriate opportunities. These specialists provide value by pre-screening companies for fit, educating sellers about search fund benefits, and facilitating fair negotiations. Building relationships with these specialized intermediaries creates deal flow advantages. Geographic and industry-specific brokers often have better deal quality than generalist online marketplaces. A broker specializing in industrial distribution in a specific region knows the market deeply and maintains relationships with potential sellers who trust their guidance. Searchers should identify and cultivate relationships with such specialists in their target sectors. The optimal approach combines both channels—maintaining active outreach campaigns directly to business owners while also developing relationships with quality intermediaries. This diversification maximizes opportunities without over-dependence on any single source. The key is discipline—whether deals come through brokers or direct approaches, valuation discipline and strategic fit matter more than deal source.