Sector Specialist Or A Generalist Business Broker To Sell A Business?
What is sector specialisation?
There are 1000+ business brokers, business transfer agents, corporate finance firms and other agencies in the UK helping business owners sell their businesses. In fact, there is so much buying / selling of businesses in the UK that many of these agencies / intermediaries have specialised in a particular industry or sector.
For example, there are over 200 brokers in the UK who sell just hotels and restaurants, there are over two dozen that take on just accountancy practices and there are dozens of brokers / intermediaries who focus on the sale of just estate agency businesses!
To give you an idea of the choices, let's take an example of a dental practice.
If you want to sell a dental practice you could go directly to firms that buy dental practices - firms such as BUPA , IDH Group and Rodericks, though that would be extremely foolish as savvy business owners realise they need an expert to attract multiple buyers and build competitive tension. So they turn to generalists like Christie's (a large national firm of business brokers who have a department dealing with the sale of just dental surgeries), or they go to one of the specialist firms ... and there are many of them.
For example, Crowley, Dental Elite, Frank Taylor, HL Dental, Lily Head, MediEstates, Strictly ConfiDental, PFM Dental, Flame , Oswald Browne and others focus on the sale of just dental practices. Some of these specialists are brokers, others aren't. Goodman Grant, Ison Harrison and others are legal firms - not brokers - but they also specialise in the sale of just dental practices!
Whatever industry or sector your business is in there are probably numerous firms that specialise in businesses just like yours. But you'll never be able to find them using tools like Google! (That's why we put together the UK's largest database and knowledge base of business brokers and related firms and created our broker matching service.)
Just like brokers who sell just dentist practices, there are brokers who specialise in other sectors such as
- pubs;
- education (day nurseries, academies, Pupil Referral Units etc);
- online businesses (websites, Amazon / eBay merchants, apps etc);
- retail (high street shops);
- beauty and fashion (including hair salons);
- TMT (Technology, Media, Telecoms);
- B2B services (office cleaning, consultancies etc);
- construction (including facilities management, building maintenance etc);
- ONG (Oil & Natural Gas);
- financial services (payroll companies, mortgage brokers, etc);
... and the list goes on.
Brokers handling the sale of smaller businesses tend to specialise in, for example, fish 'n chip shops, or cafes and restaurants, or post offices, or hair salons, or plumbing businesses or day nurseries.
When it comes to the sale of larger businesses, however, it's very different. There are all manner of sector specialists, some very, very niche indeed. Take TMT; even within the SaaS and Fintech sub-sectors in TMT, there are several brokers with sub-sub-sector specialisations.
More examples: Among brokers selling businesses in the education sector there are some who specialise in just language schools; among specialists in the recruitment sector there are several brokers who deal only in recruitment companies supplying staff to the construction industry!
Pros to using a sector specialist
Deep Knowledge of What Buyers Want
There are numerous advantages to using a sector specialist. For one, they know what buyers in the industry are looking for and can advise you on what you need to change in your business to make it more attractive to these buyers.
Knowledge of Games Buyers Play
Secondly, they know the buyer objections and hurdles i.e. they know what excuses (and tactics) buyers in your industry typically use to negotiate the price down. These excuses and tactics vary widely from industry to industry and it helps to have a broker on your side who knows the games buyers in your industry play.
The typical buyer is a well funded firm (or individual) and they tend to have a lot of expert advice on tap. The information gap between buyers and sellers is absolutely mind boggling and it puts sellers at a severe disadvantage. Having a sector specialist broker on your side evens the playing field.
They Know Who The Buyers Are
Sector specialist brokers have high quality buyer lists. Here's how: For every business the broker has put on the market in the past he has had several buyers express interest but who did not go on to be the winning bidders. Brokers collect these names. The names a sector specialist collected will, naturally, be of buyers looking for businesses specifically in your sector.
Bear in mind that such focused buyers tend to be strategic buyers who can afford to pay well and can justify a higher price.
Better Able To Keep Confidentiality
Having a high quality list has other benefits. It helps with confidentiality as the broker does not need to do a lot of marketing of the opportunity and can contact buyers directly instead. It also reduces the time to deal completion as there's no marketing delay waiting for prospective business buyers to find the ad and get in touch.
Knowing the Legal & Regulatory Requirements
In a case I'm aware of, a generalist business broker sold an FCA regulated financial services firm but didn't realise that FCA regulated firms need the FCA's prior approval for the sale (and prior approval of the buyer). Not getting these prior approvals is not just an offence, it's a criminal offence. The business owners only narrowly avoided jail - because they pleaded guilty at the earliest opportunity - but the whole affair costed them almost the entire amount they made on the sale of the business!
This is not just a financial services sector issue. There are rules around nurseries etc. which businesses are Ofsted registered, care homes that are CQC registered, all kinds of other firms registered under different laws. You need Post Office Ltd to approve the person who's taking over your post office, for example. It doesn't matter whether you service commercial gas boilers or run a business that has any IT/security related implications or connections with defence suppliers, you probably need to get some clearances and approvals.
Brokers who specialise in your sector are best placed to advise on all these formalities. Generalist brokers often don't know the formalities in your sector, or they just want to get the deal done and they hope that nobody in authority notices what happened (which tactic, to be fair, does often work).
The Cons
The major downside to sector specialisation is that there can sometimes be a cosy relationship between broker and buyer/s. You need to protect against this (and we advise our clients on how to protect themselves against broker bias and conflict of interest).
So which one is right for YOU?
Many business brokers and other intermediaries have advice on their sites telling you whether you should use a sector specialist or not.
Unsurprisingly, brokers who are generalists, or "sector agnostic" to use the industry terminology, argue that selling a business is selling a business and that sector knowledge is not critical and, in fact, that sector specialists might have too cosy a relationship with buyers.
Similarly, brokers who are sector specialists wax lyrical about why you shouldn't use a generalist!
My opinion: In most cases, not all, in makes sense to use a sector specialist. But you need to bear in mind the caveats mentioned in the previous section.
Arguments the sector agnostic broker might use
Brokers who are sector agnostic will, of course, say that sector specialisation doesn't matter. They maintain that being a sector expert doesn't add any value. They might even argue reasons as to why you should use a sector agnostic broker rather than a sector specialised one.
This is best illustrated by a conversation I had with one of the UK's largest and best known sector agnostic brokers:
Broker: Selling a business is selling a business, sector expertise doesn't really matter.
Me: Wouldn't a sector expert be better placed to speak the language that buyers in that sector are speaking?
Broker: The language is the same - EBITDA, PBT, ER, P&L are common to all businesses. I could do anything a sector expert could do.
Me: Okay, assume you're selling a daycare nursery, how would you advise the business owner with respect valuation multiples?
Broker: I'd look at valuation multiples for the industry in general and advise him on the multiple of earnings that businesses like his are selling for.
Me: Ah, but that doesn't take into account that nurseries with an Ofsted rating of "Outstanding" can achieve higher multiples than nurseries with a "Good" or "Needs Improvement". Would you know by how much prices differ between Outstanding and Good? Or in the case of care homes, a CQC rating of Outstanding vs Good?
Broker: I could find that information out.
Me: But you didn't know that the inspection report has a bearing on price! Let's move on. What about food establishments and hygiene ratings?
Broker: I guess there'd be a similar difference between those rated Outstanding and Good.
Me: No, there isn't. First, ratings aren't in the form of "Outstanding" and "Good". They are numerical. Food establishments are graded from 1 to 5. But, it's not relevant anyway. Prices for food establishments are affected more by Trip Advisor ratings than hygiene ratings.
Broker: Well, that's common knowledge, I'd of course take into account all ratings and reviews.
Me: I'm sure you would. But someone who deals with just food businesses would know a lot more about pricing and how much the market would be willing to pay for the attributes the client's business has.
Broker: We'd look for the best price, obviously. But it's not just about price.
Me: Sure, it's about the whole deal structure, and not just headline price. But what about the attributes that buyers are looking for in a business? Surely, it's important to know those attributes in order to put together an Information Memorandum that appeals to those buyers?
Broker: Buyers are all looking for the same things - profit, lack of reliance on the owner etc etc.
Me: Yes, but buyers in some sectors have some very specific concerns and questions that you need to address in the Information Memorandum if you even want them to proceed to the next stage.
Broker: Oh, yes, we'd address all those concerns and questions in the IM.
Me: But you don't know the concerns buyers in specific sectors might have! Say you've taken on an Amazon retailer - a big retailer who sells say £10m per year on the Amazon platform. What do buyers of businesses like that one want to know about the Amazon account?
Broker: They'll want to know the customer feedback scores.
Me: And?
Broker: Well, everything about the account.
Me: Yes, could you expand?
Broker: I've not sold an Amazon business before.
Me: Then you wouldn't know about all the metrics Amazon tracks in relation to the health of the account - average time taken to respond to emails, percentage of returns, stock levels etc etc. These are mega important to buyers in this sector. A broker who knows the importance of account health, for example, would include this in the IM from the start. He's also include information on whether the retailer has acquired any special Amazon permissions - like the permission to sell kitchen knives. When a retailer has permission to sell restricted items it makes them more valuable to buyers.
Broker: I'm sure I could figure it out if I ever took on an Amazon retailer.
Me: I'm sure you'll figure it out. By the way, how would you price an accountancy practice? Say there's a small practice with about half a dozen accountants working in the firm and they come to you to sell their practice. How would you advise them on price / valuation?
Broker: Value is generally a multiple of EBITDA. So if accountancy practices are selling for 5 x EBITDA, I'd work out what the business is likely to fetch by calculating their EBITDA and multiplying be 5.
Me: Hmm. Accountancy practices aren't generally valued on EBITDA multiples. They are usually valued differently to other businesses. Buyers in this market want to know what multiple the price is of Gross Recurring Fees, not EBITDA.
Broker: I didn't know that.
Me: I rest my case. If you don't know the industry and the jargon, the idiosyncrasies and peculiarities of that sector, buyers could take advantage of your lack of knowledge and exploit it.
Broker: That has never been a problem for us before.
Me: Okay, if you say so.
How to find a sector specialist to sell your business?
It's amazing just how many sector specialists there are in the UK. For example, there are over 20 intermediary firms in the UK who sell just accountancy practices!
There are over 50 firms specialising in the sale of technology ("TMT") businesses - firms like Strata Partners, Sett & Lucas, SI Partners, GP Bullhound etc - huge names, but names that most people would never have come across! And there are dozens of smaller firms that may even take on clients who have a turnover as low as £2m.
That's not to mention large firms that have different departments within the broker firm handling different sectors, each with its own sector specialists. Names like Results International, Lincoln International, Duff & Phelps, Houlihan Lokey, Liberum Capital, Peel Hunt, Alantra, Canaccord Genuity, Zaoui, RSM, Numis Securities and dozens of others (some good, some not so good)!
You may not have heard for any of the above names, but they sell billions of pounds of businesses more than the likes of KBS (Knightsbridge), Intelligent, Blacks, Turner Butler, RTA etc that the average, uninformed business owner ends up hiring!
Whatever your sector, there are lots of big names out there that can possibly get you a much better price than any generalist (sector agnostic) broker might be able to get.
We have an article on how to find a broker, but the only comprehensive database of broker specialisations is the one we've built and use (to provide paid broker matching assistance). Our database and knowledge base is the only one of its kind in the UK and includes everything you need to know about UK professionals and firms handling the sale of businesses.
We track not just sector specialisations but also fees and fee structures; geographical coverage; typical size of business each broker handles; staffing levels; qualifications, certifications and regulatory approvals; client feedback ... and much more.
Get in touch if you wish assistance with finding a specialist broker for your business and with having us negotiate the price and terms for you.
- sub sectors
A full list of UK sectors can be found at Companies House.
Some of the broad industry sectors are:
Aerospace industry
Agriculture (see also Agribusiness)
Fishing industry
Timber industry
Tobacco industry
Chemical industry
Pharmaceutical industry
Computer industry
Software industry
Construction industry
Defense industry
Arms industry
Education industry
Energy industry
Electrical power industry
Petroleum industry
Entertainment industry
Financial services industry
Insurance industry
Food industry
Fruit production
Health care industry
Hospitality industry
Information industry
Manufacturing
Automotive industry
Electronics industry
Pulp and paper industry
Steel industry
Shipbuilding industry
Mass media
Broadcasting
Film industry
Music industry
News media
Publishing
World Wide Web
Mining
Telecommunications industry
Internet
Transport industry
Water industry
Direct Selling industry
Note: Many businesses don't fall squarely in a particular sector, they straddle multiple sectors. Contact us for advice on finding the right broker for such businesses.
Note also that when looking for an intermediary in a particular sector, intermediaries go by many names including Corporate Finance Consultants, Business Transfer Agents, M&A Advisers, M&A Advisory Boutiques, ECM (Equity Capital Markets) Advisers, Commercial Real Estate Agents, Exit Planners, Corporate Strategy Advisers etc.
Learn how to extract value from your business:
- How to ensure you get top price and meet all your exit goals.
- How to ensure you're in the top 20% of businesses - the ones that sell - not the 80% that fail.
- How to get to a quick AND safe completion.