Thinking about selling my 12-person HVAC company. Broker quoted 8% commission and said they'd handle outreach. I've been poking around on LinkedIn and found several regional consolidators and PE-backed groups that look like active buyers. Part of me wants to just message a couple of them directly and save the fee. Has anyone gone this route? Worth it or am I asking for trouble?
Selling
Should I contact potential buyers directly on LinkedIn?
I'd be careful. Buyers know when there's no broker, and they'll assume you don't know what you're doing. Not saying it can't work but you need to be disciplined.
We tried to handle a divestiture internally once and sent out teasers under our own name. Phone rang for two weeks with tire kickers and one guy who wanted to buy the building. If you do it, use a separate email and generic language.
8% is steep for a business that size. But 8% of a good price beats 0% of a bad one.
That's fair. I should've mentioned I'm not in a rush but I've got a timeline on my side over the next 18 months, so I'm testing whether the broker's network is actually better than my own.
The commission is negotiable, especially if you bring the buyer. Ask your broker if they'll do a reduced rate for a buyer you source. I did that on my last deal and we settled on 4%.
Went on a few dates with this route. Guys with PE money talk a better game than they operate. They'll get you to share revenue and customer concentration before they've even proven they're serious. Don't send your P&L to anyone until you've got an NDA in place, and probably not even then until you're sure they're not just farming data from your industry.
I would second the NDA thing. Also be careful about the professionalizing tendency. You mention reaching out directly, but that is exactly the first thing a broker does too, and then the buyer negotiates down from your asking price because they know you are not represented.
Appreciate the NDA warning, CornerBakeryGuy. I hadn't thought about the data-farming angle. The HVAC service side is pretty concentrated in our region, so it wouldn't take much guessing to figure out where the customer churn is.
No. Wouldn't do it for my firm. Have seen too many deals fall apart because the owner went over the head of the intermediary. The buyer gets spooked by the lack of process
SleepyMarble, can you say more about the lack of process piece? I hear you but I'm not sure I understand what gets a buyer spooked if the numbers are the same.
A lot of the value in an orderly process is that the buyer knows all bidders are are on the same schedule and the same information. Direct outreach often leaves the buyer wondering whether the owner is testing the waters or is serious. If you do it, I'd at least use a broker for the actual negotiati on stage. Pay them hourly or a flat fee instead of a percentage.
How big is the company by EBITDA? The answer changes a lot at different sizes. Under a million and most quality brokers don't want it anyway, so you may have no choice.
loosegravel, roughly 1.1M adjusted EBITDA. The broker I talked to seemed interested but not exactly hungry for the mandate.