Can you trust business broker DD?

This topic contains 7 replies, has 8 voices, and was last updated by  Peter Sakaitis 8 months ago.

Viewing 8 posts - 1 through 8 (of 8 total)
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  • #115845


    Participant

    In acquisitions, the target company may often have business brokers or (agents) who are selling the company on their behalf. Given the extreme variance in requirements to become a business broker across the world in terms of: qualifications, skillsets, monitoring etc. As an acquirer, to what extent do you trust figures that are provided by a business broker who claims that they have conducted thorough DD on their client?

    #115849

    Paul Reed
    Participant

    No.

    I have serve as an business intermediary/broker for over 5 years now and would agree the qualifications for this industry are minimal at best and there are no self regulating organizations.

    Often these business broker positions entail simply attending a short few days of corporate training to give an overview of the transaction process.

    Intermediaries without additional education in the M&A or in financial analysis are not prepared to conceptualize or provide due diligence outside of a generic report on the business.

    Further, no intermediary should claim they have conducted a formal due diligence on any business.

    #115969

    Clifford Newton
    Participant

    Agreed. Do it yourself or don’t do it.

    #117106

    Sebastien Perroud
    Participant

    I receive regularly deal proposals from brokers. Depending on the brokers, these are fairly well prepared and allow a quick first impression of the company. Normally, the figures and financial results of the past years are consistent. On the other hand, the development potential of the company (and the valuation) are well over-estimated. An additional DD is mandatory!

    #117667

    Kevin Ng
    Participant

    I agree with some of the comments here. Business broker DD is difficult to trust as they are not incentivized to do a robust or objective DD. Definitely do your own DD as a buyer, but i would say if the target has done one round of business broker DD, it would make it much faster to conduct buyer DD as at least the basic information would have been categorized and gathered by the business broker

    #117842

    Leslie Tan
    Participant

    it seems that at the end outsourcing the work creates more work to check and the risk of bad quality of work done. however having it done by yourself might mean the DD cannot completed within the expected timeframe

    #117907


    Participant

    I don’t trust very easily so i would so not to trust the Broker. Best if to do it yourself if you can, or if you have to use a broker get a second opinion.

    M

    #118655

    Peter Sakaitis
    Participant

    Consultants that come in and are commission based on closing might not always have the best interests of both parties at the forefront

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