Does anyone have experience working with a buy side broker?

searcher profile

March 03, 2021

by a searcher from Santa Clara University - Leavey School of Business in Redwood City, CA, USA

Any experience, guidance, or recommendations here would be very much appreciated. We haven't worked with brokers on the buy side, but would be interested to learn the ins and outs/pros and cons.

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commentor profile
Reply by a searcher
from University of Texas at Austin in Austin, TX, USA
Much like sell-side brokers, buy-side brokers are not all created equal. The buy-side broker I am working with takes very few buy-side clients and also specializes in business advisory. My broker charged an upfront fee (flat, not monthly) and has a variant of the Lehman formula for the buy-side fees. They've brought me 3 deals that are all off-market. I'm a self-funded searcher, probably down-market from some of the larger funds on this platform ($2-5MM) -- and my broker has a lot of relationships in my primary geography. As I'm still working full-time, self-funded searcher, my broker is my main deal flow - and I've been very satisfied with this arrangement.

It might also be helpful to work with a buy-side broker that is well connected in a particular niche, as working through a roll-up, etc.

For brokers, there isn't as much "in it" for them on the buyside, and if there are two brokers being paid out of a transaction - it can get spendy on the deal - so you need to make sure the advantage/service offering is worth it.

My broker was ultimately a referral - but I did a lot of due-diligence about the broker up front. I requested references from other buy-side and advisory clients. I was also ruthless about my options and term for convenience, non-performance, etc. clauses in the contract.

Happy to chat through with anyone, ping me - and we'll set up some time to 1x1. I have a lot of experience from real estate and my corporate life in supplier contracts, so happy give you insight to what I did. I'm not an attorney, and I'd always recommend attorney review for any contractual agreements.
commentor profile
Reply by a searcher
from Georgetown University in Waterloo, ON, Canada
Interested in hearing more on this. I'm a SF searcher and considering this path. Reasoning - taking every single possible avenue to find the deal is my direction.

Every additional month that passes has an opportunity cost from working a job or being in a business. Additionally, if the value they provide is on a proprietary deal, the hope is that the valuation is lower than a traditionally marketed deal. Adding these together may justify the cost.

It is not a replacement for my search, but rather a way to add steroids to an existing process.
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