A finder firm is often mistaken for a broker or a sell-side advisory group. There are key differences that are very impactful to a potential seller.
We are often asked, “what is a finder and are you a broker?”. So here is the long answer.
A finder supports both buyers and sellers of companies but is only compensated by the buyer when a deal closes. Finders are often mistaken for business brokers, but the two are very different. A business broker represents a seller and is compensated by that seller – often through a monthly retainer fee and a 3-6% fee based on the transaction value. This can add up to hundreds of thousands of dollars for a typical M&A deal, in some deals even millions.
A finder is only compensated when a deal closes. This provides a ton of flexibility – both financially and personally to the seller. The seller has no obligation to pay a monthly fee or even a closing fee if he/she sells their business. The seller also does not have any pressure throughout the process. They can work directly with the buyer eliminating any conflicts of interest.
The retainer fee a broker charges is not unreasonable though, this ensures the seller is actually committed. A lot of work goes into finding the buyer, helping the seller along the way and negotiating on their behalf. This requires compensation.
A finder, however, leaves a lot of this up to the seller. The seller is in full control of their own process. They negotiate directly with the buyer and have full control of confidential information being shared with the parties involved.
