How do we evaluate whether to hire an industry-specific investment banker versus a generalist business broker on our exit runway, and what questions expose their true deal capabilities?

Question

Tyler Smith · Accepted Answer

The choice between a business broker and an investment banker comes down to enterprise value, deal complexity, and buyer universe. If your company generates under two million dollars in EBITDA, a reputable regional business broker may suffice. If your business produces three to ten million dollars or more in EBITDA, hiring a generalist broker will cost you millions in lost deal leverage and mismanaged process design.

At institutional scale, you need a specialized M&A advisory firm or industry-focused investment bank. Generalist brokers list companies on public business-for-sale websites and wait for inquiries. Investment bankers run disciplined, competitive auctions among pre-vetted private equity groups and strategic corporate acquirers who pay strategic multiples.

When interviewing advisory firms eighteen to twenty-four months out from market launch, ask three diagnostic questions:
- What specific transactions have you closed in our exact sub-sector over the last twenty-four months, and which partners led those deals from pitch to close?
- How many proprietary strategic buyers versus private equity platform sponsors are currently active in your rolodex for our business model?
- Who will actually write our confidential information memorandum and run our weekly deal calls, a senior partner or an associate three years out of business school?

Demand clear data on their historical closing rate. Many low-tier intermediaries sign dozens of engagement letters knowing only thirty percent will ever close. A top-tier investment banker acts as an aggressive fiduciary. They will audit your EOS V/TO, stress-test your adjusted EBITDA add-backs, and help you fix operational gaps on your runway before they ever draft marketing materials.