As you prepare your business for a sale, you may want to consider engaging an intermediary to help you market and sell your company.

Why choose an intermediary?
Choosing to engage an intermediary to market and sell your company is purely a business decision. Sellers tend to go this route because they simply don't have the right level of expertise in-house. Some owners, particularly those with smaller businesses, may know already interested buyers and feel comfortable determining the value of the business and conducting negotiations. For others, an intermediary will be the key to finding likely buyers, maximizing the number of potential buyers, and determining the value of the business.

Intermediaries can have access to the most current information in the M&A marketplace and have a depth of experience to draw upon in marketing your business and advising on valuation. This experience can also be helpful in negotiations, and an intermediary's involvement also creates a buffer between the seller's principal decision makers and potential buyers.

The exact services that an intermediary provides will differ from transaction to transaction and will depend on the type of intermediary engaged by the seller. Most, if not all, of an intermediary's compensation is earned only if the business is sold. So intermediaries have an economic incentive to minimize problems and find solutions to those that threaten the deal.

Types of intermediaries
There are several types of intermediary that you can engage to help with the sale of your business. Here, we focus on the two most common: business brokers and investment banks.

A business broker is an agent that represents one side in the sale. A seller will usually list the business for sale with the business broker. The broker will field inquiries from potential buyers and ultimately will put one or more potential buyers in contact with the seller. Business brokers are common on smaller deals - most often by local sellers selling to local buyers.

An investment bank is a full service financial advisor that can provide advice regarding the valuation of the business (including rendering a fairness opinion), conduct the marketing process, advise on the appropriate structure for the sale, participate in the negotiation of financial terms and (if necessary) assist to raise funds to finance the transaction. An investment
bank, like a broker, works for one side of the deal and not both.

An investment bank is a more appropriate intermediary for larger businesses where buyers may include large publicly traded companies or investment funds. As a business owner, you may not have knowledge of or access to these potential buyers without the support of the banker.

Choosing your intermediary
Whether you choose a business broker or an investment bank, it's important to find the intermediary that will best suit your needs. Keep in mind that you'll want someone who is not only right for your business, but also someone you trust and 'mesh' with personally.

Your legal counsel we can be a valuable resource to you in this regard as they've worked with various intermediaries and have seen firsthand their strengths and weaknesses. Other advisors, such as directors and accountants may also provide input. Consider the following as you compile your list of potential candidates:

• experience dealing with the potential size of your sale;the services you'll require, including participation in negotiations and advice on valuation issues and negotiating tactics;
• familiarity with you and your business;
• familiarity with the industry and competitive dynamics;
• transaction experience;
• cost and fee structure;
• positive references; and
• a tradition of representing companies and/or deals of same size and profile.

Once you settle on a list of potential candidates, make an initial contact to gauge the intermediary's interest in working with you. Schedule an interview with your short list of interested candidates, and be sure to obtain
a confidentiality agreement before you meet.

Terms of the Engagement
Once you select your intermediary, you will outline the terms and conditions of the engagement in a written agreement. This is usually in the form of an
engagement letter. The engagement letter will define the services that the intermediary will perform and the scope of the engagement, describe the fees it will receive and who will be responsible for payment, and address the consequences of termination of the engagement. The intermediary typically prepares a first draft of the engagement letter, but the final terms of these agreements can be, and usually are, negotiated.

Are you ready?
Before you enter into any sort of discussion with potential intermediaries, ask yourself one last time: am I ready to sell my business? As with any business deal, a positive outcome requires that both sides be committed to success. An intermediary who feels it is working with a wavering seller will quickly lose interest and move on to other prospects. What's more, it will be difficult to restart a sales process that has been abandoned.