Definition - What does Buyer Broker mean?
A buyer broker is also called a buy-side advisor or buy-side intermediary. They represent the buyers in a transaction. Buyers are the clients of buyer brokers. Buyer brokers sign an agency buy-side agreement with a prospective buyer and search for opportunities that fit the acquisition mandate of the acquirer.
Rarely do buyer brokers negotiate on the price and terms of the transaction on their client's behalf. In addition, they do not have the power to sign purchase agreements or closing documents.
Divestopedia explains Buyer Broker
Traditionally, a broker provides a full service, commission-based brokerage relationship under a signed agreement with the buyer called the buyer representation. The agreement specifies the period for which the broker is engaged as well as the terms and conditions related to the broker's engagement. They assist private equity or strategic buyers in finding available acquisition targets. These targets can be proprietary deals or businesses that are already on the market actively engaged in a sell-side process.
An issue in the business brokerage industry is when a buyer broker re-lists the listings of a seller broker in the hopes of being retained by a buyer. This re-listing sometimes happens without the consent of the selling broker. If a buyer broker is retained by a buyer who subsequently buys a business found by the buyer broker, the buyer broker collects a commission from the buyer. This can obviously cause complications in the sales process because a buyer must first sign a buyer agreement before they can see a listing that may already be publicly available.
Many buyer brokers provide significant value-added services for their clients. They identify investment opportunities in specific sectors through intensive search processes. These professionals can originate proprietary opportunities. Services offered by high-end buyer brokers or buy-side advisors can include:
- Preparation of investment analysis and strategy
- Execution of target searches for the most appropriate acquisition candidates
- Securing financing for completion of the transaction
- Leading the analysis of valuation, structure and negotiation of the deal
What Can a Private Equity Investor Control in a Deal?
Join thousands of others with our weekly newsletter