How to choose an M&A adviser or business broker

Business broker or M&A adviser: what is the difference?

In Singapore the two terms are used loosely, and many firms do a mix of both. The useful distinction is how buyers are found.

Neither model is right for every owner. A single-outlet business with a wide pool of individual buyers may suit a listing. A business whose natural buyers are strategic groups, regional acquirers or private equity-backed platforms usually needs a direct approach. Ask any firm which model they would use for your business, and why.

How M&A advisers and brokers charge

• Success fee. A percentage of the deal value, paid on completion. Some firms use a sliding scale, with a lower percentage on higher values. Ask exactly what the percentage applies to: the headline enterprise value, the equity price you receive after debt, or a total that includes deferred payments and earn-outs.
• Minimum fee. Many success fees have a floor. Check what the minimum would be as a share of a realistic price for your business, not the hoped-for price.
• Retainer. A monthly or upfront fee paid whether or not the business sells. Ask what work it covers and whether it is credited against the success fee.
• Fixed fees. Some firms charge a fixed fee for a valuation or for preparing materials. This is reasonable when the scope and deliverable are clear and agreed in advance.
• Expenses. Ask whether listing costs, data room software, travel or other expenses are charged on top, and whether there is a cap.

Deferred payments deserve a specific question. Typically 50% to 85% of the price in an SME deal is paid at completion, and earn-outs of 20% to 40% are common for owner-dependent businesses. If the success fee is calculated on the full headline and paid at completion, you may pay fees on money you never receive. A fee paid on deferred amounts only as you receive them is fairer to you. Our guide on deal structures explains how these payments work.

Exclusivity, termination and tail clauses

The engagement letter sets the rules for the whole sale. Have your lawyer read it, and pay particular attention to three terms.

• Exclusivity. Most advisers ask to be the only firm acting for you, which is reasonable because a business marketed by several firms at once tends to look distressed. Check how long it lasts, whether it renews automatically, and whether it covers buyers who approach you directly. A defined period with a clear right to end it is easier to live with than a long or open-ended lock-in.
• Termination. Check whether you can end the engagement if the service is not working, how much notice is needed, and what you owe on termination.
• Tail clause. This makes a fee payable if you sell within a set period after the engagement ends. A fair tail protects an adviser from being dropped just before a deal they created. It should be limited to buyers the adviser actually introduced or engaged with, listed in writing when the engagement ends, for a limited period. Be cautious about a tail that covers any buyer at all, including one you find yourself years later.

Also ask for written consent rights over marketing: you approve the teaser, the buyer list and any listing before it goes out.

Warning signs to watch for

None of these proves a firm is acting in bad faith, and many reputable firms use some of these terms. They are points to ask about before you sign.

• Large upfront fees. Particularly when they are not tied to specific work you can see, or are not credited against the success fee.
• Long exclusivity. An engagement that runs for a long time, renews automatically or has no termination right for you.
• Broad tail clauses. A tail that covers every buyer, not only those introduced, or that runs for a long period.
• Listing without consent. Any suggestion that your business will be listed publicly or sent to buyers before you have approved the material and the list.
• Valuation used as a sales pitch. A high figure mentioned early, before the firm has seen your accounts, can win a mandate and then be talked down once you are locked in. Asking prices on Singapore listing sites often run at 4x to 10x stated profit, while most owner-operated SMEs with S$0.3m to S$3m of normalised EBITDA sell for roughly 2x to 5x normalised EBITDA. Around a third of adviser-led sales do not complete, most often over a valuation gap of 11% to 20%. A realistic figure from the start protects you more than a flattering one.
• Vague answers about who does the work. The person who pitches should be able to tell you who will write the materials, call the buyers and sit in the negotiations.
• Pressure to sign quickly. A good adviser will give you time to take the engagement letter to your lawyer.

Questions to ask before you hire an adviser

1. Which model would you use for my business, a listing or a direct approach, and why?
2. What types of buyer do you expect to be interested, and how would you reach them?
3. How did you arrive at your view of value? Which earnings figure and which multiple did you use?
4. What will you need from me, and how much of my time will the process take?
5. Who exactly will work on my sale day to day?
6. What is the success fee, what is it calculated on, and when is it paid on deferred amounts and earn-outs?
7. Is there a minimum fee, a retainer or any upfront cost, and is it credited against the success fee?
8. How long is the exclusivity, does it renew, and how can I end it?
9. What does the tail clause cover, and for how long?
10. Will anything about my business be listed or sent out without my written approval?
11. How will you protect confidentiality, and when do you suggest I tell my staff?
12. Do you ever act for, or receive fees from, buyers? How do you handle conflicts?
13. Can I speak to owners you have advised before, with their permission?

How to check the answers

• Test the valuation. Compare it with the ranges on our Singapore SME valuation multiples page and with your own estimate from the business valuation calculator. If a firm's figure is far higher, ask what evidence supports it.
• Ask to see sample materials. A redacted teaser and information memorandum show the quality of the work and how carefully the business was anonymised.
• Speak to past clients. Ask how close the final price was to the first estimate, how much of it was paid at completion, and whether they would hire the firm again.
• Compare like with like. Put two or three engagement letters side by side and compare the total fee at the same realistic price, the exclusivity and the tail.
• Use your lawyer. An engagement letter is a contract. A short review costs far less than an unclear fee dispute later.

Do you need an adviser at all?

Not always. If you already have a single committed buyer, such as your management team or a business partner, you may only need a lawyer, an accountant and perhaps an adviser on a fixed fee to test the price and negotiate the terms. Our succession planning guide covers these internal routes. If your business is small and simple, a listing-led broker may be the right fit. If your best buyers are likely to be groups and acquirers who are not actively looking at listings, or you need strong confidentiality, an approach-led adviser is usually worth the fee.

For comparison, Clearmere's sale fee is success-based and paid on completion: no sale, no fee. A written valuation is a separate fixed fee, agreed before work starts, and credited in full against the success fee if you sign within 6 months and the sale completes. Whichever firm you choose, ask for the same clarity in writing.