What does a business broker do?

A business broker is an intermediary who helps an owner find buyers and approach them. BDC, the federal Crown bank for entrepreneurs, says business brokers and investment bankers have access to a broad network of qualified buyers whom they can discreetly approach on the seller’s behalf. BDC adds that they can help you navigate the sale process. BDC assigns the financial and legal sides of a sale to an accountant and a lawyer, and licensing for brokers is set province by province.

The part a broker is there for

BDC lists a business broker (for smaller businesses) or investment banker (for larger ones) among the people who can help in finding buyers, and says a broker or other intermediary can help you approach industry contacts such as competitors. BDC also says an owner’s accountant, lawyer, banker and other professionals will often hear of entrepreneurs who want to acquire a business. On listing sites, BDC cautions that, depending on a listing site’s confidentiality procedures, word could get out to employees, customers or suppliers that you are selling. If you are weighing a broker, ask how buyers are screened and what they sign before they see the business name.

What a broker does not replace

BDC assigns other work to other advisers. An accountant helps prepare year-end and interim financial statements, projections and the other documents buyers typically ask to see, and can structure the deal to minimize the tax liability from the sale. A lawyer familiar with business transitions supplies information to buyers during due diligence and negotiates the purchase agreement. A business valuator can give a realistic picture of what the business is worth. Ask any broker which of these tasks the firm handles and which you must arrange yourself.

Licensing depends on the province

Ontario’s Trust in Real Estate Services Act, 2002 defines “real estate” to include businesses, whether with or without premises. Subject to the exemptions in section 5, it says no person shall trade in real estate as a brokerage unless registered as a brokerage, and “trade” includes any act or negotiation, directly or indirectly, in furtherance of a disposition. In British Columbia, BC Financial Services Authority says some real estate licensees may act as business brokers where no real property is involved. It also says the Real Estate Services Act applies when a licensee facilitates an asset sale whose assets include real estate or rental real estate. For a share sale of 100 per cent of a company with no real property owned or leased, BCFSA says a licence is not required. Other provinces run their own regimes, so check with the regulator where the business operates. Do business brokers need a licence in Canada? compares the two regimes.