Sunday Night Diary: Beware the Jackleg Broker

I was reminded this week why business brokers have a bad reputation. I am working on behalf of a successful manufacturing company in the Nashville area that is interested in growth through acquisition. The company retained me several months ago to develop their acquisition strategy, identify possible candidates for acquisition, then work through the process to get a transaction, or two, completed before the end of the year. Earlier this week I identified a company north of Nashville that looked to be a possible fit for my client, so I contacted the selling company’s business broker, who works for a well-known commercial firm.

Oddly enough, the first thing this business broker told me was he did not cooperate with other business brokers. When I hear that, I assume the broker is more fixated on his fee than getting a deal done. After all, here I am calling on behalf of a company with money that wants to make an acquisition, and because he might have to share his fee, the selling company’s broker won’t talk to me? In a word, dumb. No, make that two words, dumb and selfish ….. as I see it, the seller’s broker was putting his interest ahead of his client. No true professional would ever do that, ever.

I told the seller’s broker that my client would pay my fee, which then made him comfortable he’d make his full fee. So, he sent me an NDA, which I immediately signed and returned, at which point he sent me the “offering memorandum” on his client company. This memorandum looked like something done for an 8th grade Junior Achievement project (not to insult Junior Achievement, of which I am a big fan). The “marketing package” had a few hundred words essentially repeating what was on the selling company’s website. But the presentation style was even more elementary….. it was typed in all caps. There were two or three pages of exhibits, which were just copies of basic financial statements, and those weren’t even properly aligned on the page. The entire package was amateurish, sloppy, and made the client company look like a total loser.

I couldn’t help but wonder what this broker had done, or said, to convince the selling company that he was the right guy to represent them.

My lesson for the week: there are lazy, incompetent, and unprofessional business brokers out there. Before you retain someone to represent your business for sale, ask them to show you two or three offering memorandums they have prepared for other companies. And make sure they agree to cooperate with other business brokers.

But, here’s the saddest part of this story. This example is not unusual. Since there are no qualifications or licensees required to call yourself a business broker in the state of Tennessee, any Jackleg looking for a fee can say they’ll help you sell your business. Therefore, you have to work harder to make sure your business broker is competent and hard working. Before you list your business for sale, interview two or other brokers, ask the hard questions, and be discriminating in the quality of answers you expect.

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Tennessee Valley Group

Jim Cumbee established Tennessee Valley Group to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, Jim has been a buyer, seller, and entrepreneur. His broad range of experience gives him unique insight into how business buyers and sellers can achieve their goals.

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