The Founder's Dilemma: Why Hire an Intermediary?
Founders who built successful companies often approach selling with the same confidence they brought to building. They negotiated vendor contracts, closed customer deals, and navigated complex business challenges. How different can selling a company really be?
The answer is: fundamentally different. Selling a company is unlike any negotiation a founder has previously encountered. The stakes are higher, the counterparties are more sophisticated, the mechanics are more complex, and the founder gets exactly one attempt. Mistakes made during the sale process cannot be corrected by iterating on the next deal.
Yet the question of whether to hire an intermediary is often framed incorrectly. Founders ask whether they can afford the advisory fee, when they should be asking whether they can afford the value left on the table by going alone. The economics are clearer than most founders realise, and they overwhelmingly favour professional representation for any transaction of meaningful size.
The Real Question: Cost vs Value
When founders consider hiring an M&A advisor, the fee is typically the first consideration. Success fees in the mid-market commonly run to several hundred thousand dollars or more. That number, presented in isolation, feels substantial. It is natural to wonder whether the money might be better kept.
This framing is backwards. The relevant question is not what the advisory fee costs but what value the advisor creates. If an advisor charges a 4 per cent success fee and generates a 30 per cent higher price than the founder could achieve alone, the net benefit is substantial. The fee is not a cost to be minimised; it is an investment to be evaluated on returns.
The comparison should be between the net proceeds with an advisor versus net proceeds without one. A $50 million transaction with a 4 per cent fee leaves the founder with $48 million. A $40 million transaction handled alone leaves the founder with $40 million. The advisor generated $8 million in incremental value while charging $2 million. Few investments offer that return profile.
The challenge for founders is that the counterfactual is invisible. They cannot know what price they would have achieved with different representation. This uncertainty leads many to focus on the tangible cost rather than the less visible value creation. But the data on process outcomes provides strong evidence about what founders leave behind when they go alone.
The 50 to 100 Per Cent Competitive Process Premium
The value creation from professional representation is not theoretical. Research from Focus Bankers demonstrates that a competitive sales process can result in 50 to 100 per cent increases in offers compared to proprietary sales.
This finding deserves careful consideration. A founder who sells directly to an interested buyer, without running a competitive process, might achieve a $20 million outcome. The same founder, with the same business, running a structured competitive process, might achieve $30 million to $40 million. The business has not changed. What changed is how it was presented to the market.
The premium reflects basic economics of negotiation leverage. When a buyer knows they are the only party at the table, they have no incentive to offer their best price. Their goal is to acquire the asset at the lowest price the seller will accept, not at its full market value. Every dollar they save on purchase price flows directly to their returns.
When multiple buyers compete, the dynamic inverts. Each buyer knows that offering too little risks losing the opportunity to a competitor. They bid against each other rather than against the seller's reservation price. The seller captures the incremental value that competing buyers are willing to pay.
Creating this competitive dynamic requires capabilities that most founders lack. Advisors maintain relationships with strategic acquirers and private equity firms across relevant sectors. They know who is actively looking, what they are looking for, and how to position opportunities to match buyer priorities. They manage multiple conversations in parallel, creating timing pressure that prevents any single buyer from controlling the process.
A founder attempting to replicate this approach faces significant obstacles. Cold outreach to potential acquirers rarely generates meaningful engagement. Running parallel negotiations while also operating the business creates unsustainable demands on attention. The lack of credible alternatives weakens negotiating leverage at every turn.
What Founders Underestimate: Deal Complexity
Beyond the competitive process premium, advisors provide value through navigating transaction complexity that founders typically underestimate.
BCG research on deal timelines found that approximately 40 per cent of transactions took longer to close than the timeline estimated in the deal announcement. Among delayed deals, nearly two-thirds required an additional three months or more beyond the original timeline. These delays create uncertainty, divert founder attention from operations, and create opportunities for deal terms to deteriorate.
Timeline management is a skill that comes from experience. Advisors who have completed dozens or hundreds of transactions understand the typical sources of delay and how to mitigate them. They know which due diligence requests are standard and which represent overreach. They can push back on unreasonable timelines with credibility that founders lack. They anticipate problems before they materialise and address them proactively.
Working capital adjustments represent another area of complexity that frequently surprises unprepared sellers. SRS Acquiom analysis shows that working capital purchase price adjustments are now virtually ubiquitous, present on more than 90 per cent of private target M&A deals. The average adjustment owed to buyers is roughly 0.9 per cent of transaction value.
In a $50 million transaction, that 0.9 per cent average represents $450,000 flowing from seller to buyer at closing. This is not negotiation; it is mechanics. The working capital target is established in the purchase agreement, actual working capital is measured at closing, and the difference adjusts the purchase price automatically.
Founders who do not understand working capital mechanics often set targets without considering seasonal variation, fail to normalise for unusual items, and do not anticipate how buyers will interpret ambiguous definitions. The result is predictable: money flows to buyers who understand the mechanics from sellers who do not.
Experienced advisors analyse working capital patterns over multiple periods, establish appropriate targets, define calculation methodology precisely, and negotiate dispute resolution mechanisms that protect sellers. The value created by proper working capital negotiation alone often exceeds the advisory fee.
The Fee Economics
Understanding typical fee structures helps founders evaluate whether advisory economics make sense for their situation. Industry data shows that many mid-market M&A deals in the $10 million to $30 million EBITDA range land within the 3 to 5 per cent success fee zone.
The mathematics becomes compelling when combined with the competitive process premium. If an advisor charges 4 per cent and generates even a 20 per cent increase in transaction value through competitive dynamics, the seller captures significant net value. A $50 million deal that would have been $42 million without competitive pressure generates $6 million in incremental value against a $2 million fee.
The 50 to 100 per cent premium that research demonstrates suggests the actual value creation is typically far higher. A founder who achieves $60 million through a competitive process instead of $40 million through a proprietary sale generates $20 million in incremental value. The 4 per cent fee on the higher transaction is $2.4 million, leaving $17.6 million in net value creation from engaging professional representation.
Fee structures have also evolved to better align advisor and seller interests. The accelerator formula is gaining traction, with 20 per cent of firms using it in 2024. Under this structure, the success fee percentage increases if the transaction exceeds certain valuation thresholds. An advisor might earn 4 per cent on enterprise value up to $50 million but 6 per cent on amounts above that threshold. This creates powerful alignment around maximising price.
Additionally, 41 per cent of advisors will allow sellers to delay paying a portion of their success fee until the seller receives the earnout. This structure aligns advisor compensation with the seller's actual realised proceeds, not just headline transaction value.
When DIY Makes Sense
Professional representation is not universally necessary. Certain circumstances favour founder-led processes.
When a known buyer approaches with a genuinely compelling offer, the dynamics differ from a market process. If you have an existing relationship with an acquirer, trust their intentions, and have confidence in the terms being discussed, engaging an advisor to run a competitive process may add cost without proportionate value. This assumes the offer is genuinely compelling and the founder understands enough about deal mechanics to evaluate it.
Very small transactions may not justify advisory economics. For businesses valued below $5 million, the percentage fee structures typical in M&A advisory may represent a significant portion of proceeds. Business brokers or simpler sale processes may be more appropriate for these transactions.
Founders with significant M&A experience from prior transactions may have the knowledge to navigate process complexity. Serial entrepreneurs who have sold multiple companies understand what they do not know and can supplement their own capabilities with targeted professional support rather than full advisory engagement.
These circumstances are narrower than most founders believe. The majority of transactions benefit from professional guidance, even when founders initially believe they can manage the process themselves. The experience asymmetry between professional buyers who complete multiple transactions annually and founders who sell once is simply too large to overcome through intelligence and determination alone.
Choosing the Right Intermediary
If the economics favour professional representation, the next question is which advisor to engage. Not all advisors deliver equal value, and choosing poorly can be worse than proceeding alone.
Relevant experience matters. An advisor who has completed transactions in your industry understands buyer landscape, typical multiples, and sector-specific due diligence issues. They have relationships with the strategic acquirers and financial sponsors most likely to value your business. Generic M&A capability is not enough; relevant sector knowledge creates meaningful advantages.
Process quality differentiates effective advisors from those who simply collect fees. The 50 to 100 per cent competitive process premium comes from genuine competition among multiple interested parties. Advisors who approach two or three buyers and accept the first reasonable offer are not creating this value. Rigorous process management, broad outreach, and disciplined negotiation are what generate premium outcomes.
Alignment structures matter. Advisors whose compensation increases with transaction value have stronger incentive to maximise price. Accelerator fee structures, earnout-linked payments, and other alignment mechanisms ensure the advisor benefits when you benefit.
Communication and trust are essential for a process that may extend six to twelve months. The advisor will represent your interests in sensitive negotiations, manage confidential information, and serve as your primary interface with potential buyers. If the relationship is not comfortable from the outset, it will only become more strained under transaction pressure.
The founder's dilemma is not really about whether to hire an intermediary. It is about understanding the true economics of the decision. When the data shows 50 to 100 per cent uplifts from competitive processes against 3 to 5 per cent fees, the mathematics favour professional representation for any transaction of meaningful size. The question is not whether you can afford an advisor but whether you can afford to leave that much value behind.
If you are considering a sale and want to understand how the economics might apply to your specific situation, we would welcome a confidential conversation about what a structured process could deliver for your business.