Brokered deals are where most of the lower middle market actually is. An owner who decides to sell below $10M of EBITDA usually hires someone. A private equity buyer who treats intermediated flow as second-rate has not avoided competition — they have written off the largest channel in their own market and kept the smallest.
The real risk in this channel is not the channel. It is that institutional buyers, who are disciplined everywhere else, systematically overpay in brokered processes for reasons that have nothing to do with the business.
Why buyers overpay here specifically
Because the ask is presented first. A teaser leads with a number, and the number does its work before the earnings do. Everything after that is negotiation from an anchor somebody else set. The counter is unglamorous: build your number from the financials before you look at the ask, write it down, and treat the ask as information about the seller's expectations rather than as a starting point.
Because the process manufactures scarcity. Bid dates, "significant interest", a second round. Some of that is real. Some of it is the mechanism working as designed. The discipline is to decide in advance what would have to be true about the business to justify going above your number — a specific, checkable thing, written down — and then to hold the line when it is not true. Nearly all overpayment at this size is re-anchoring on the process, not on the earnings.
Because losing feels like failure. It is not. A firm that never loses a brokered process is paying a premium for certainty, and doing it repeatedly. The buyers with the best records in this market lose most of the processes they enter and are entirely comfortable saying so.
Because the diligence window is short. Three weeks to understand how a founder-run business actually makes money is not enough, and a buyer who does not understand that reaches for price as a substitute for conviction. Being early is the fix, which is a sourcing problem rather than a negotiating one — see time to NDA, time to CIM.
The thing worth knowing about intermediaries at this size
Most US states do not require a business broker to hold any credential at all. Standards vary enormously — between firms, and between individuals at the same firm. Some intermediaries at this end of the market run processes as tight as any investment bank. Others are one person with a listing and a spreadsheet.
That is not a criticism of the channel; it is a diligence instruction. Before you spend partner time, find out what this intermediary has actually closed, in what sector, and how recently. The answer changes how you read everything else they tell you — how firm the seller's expectations really are, whether the financials have been through anyone competent, and whether a timeline they quote means anything.
It also changes what you can rely on. A well-run process gives you a seller whose expectations have been managed and financials that reconcile. A poorly run one gives you a motivated owner and a document nobody has stress-tested, which is sometimes an opportunity and always more work.
How to be the buyer a broker wants, without bidding like one
These two things are often confused, and they are unrelated. An intermediary's preference is about reliability, not about price. You can be the easiest buyer on their list and still be disciplined on the number — in fact that combination is what produces repeat flow, because it makes you predictable.
What actually earns standing:
- Reply the same day. Costs nothing. Advisors work replies in arrival order.
- Say no clearly and say why. A fast no is information they can use, and it sharpens what they send next. Silence after the CIM is the most common and most expensive mistake buyers make in this channel.
- Ask the process questions early. Is the engagement exclusive, is it under LOI, does a CIM exist, why did the previous process end. Buyers who ask those get marked as people who transact.
- Be one person, reachable. Deals get lost inside buy-side organizations. One named contact, one direct line.
- Behave well with the seller. At this size the founder is in the room and the intermediary will work with them for a year. A buyer who is dismissive in a first meeting, or who re-trades without a diligence finding to support it, does not get another introduction — and the sector talks.
The full version of how that list is used on the other side of the table is in how brokers decide which buyers see a deal.
What never to do
Never go around the intermediary to the owner. It ends that relationship permanently, and it travels. It is also the fastest way to become the anecdote other intermediaries in the sector repeat.
Never negotiate the intermediary's fee. It is not yours to negotiate, it is agreed with their client, and raising it marks you as a buyer who will be difficult later. If the economics of a deal only work by attacking someone else's engagement letter, the deal does not work.
Never re-trade without a finding. A price change supported by something specific that diligence turned up is a normal part of the process. A price change because the market moved or because you can is the thing that gets remembered.
The number to write down before the process starts
One page, before the CIM lands, kept where the deal team can see it:
- What you would pay on the earnings as presented, and the multiple that implies.
- The two or three things diligence could find that would move that number down, and by roughly how much.
- The one or two things that would justify moving it up, stated specifically enough that somebody could check them.
- The walk-away number, and the date you wrote it.
None of that is sophisticated. The value is entirely in it existing before the process applies pressure, because the failure mode is not bad analysis — it is good analysis revised without comment at 9pm on the day bids are due. A number with a date on it is much harder to talk yourself out of than a number in your head.
Where price discipline actually comes from
Not from being tough in a negotiation. From not needing this deal, which is a function of how many other live conversations you have.
That is the connection between sourcing and price that gets missed. A firm with one deal in front of it and a fund to deploy will pay up, every time, whatever its investment committee believes about discipline. A firm with coverage across intermediated, pre-market and off-market channels can walk from a process without the quarter being a loss — and the intermediary can tell which kind of buyer they are dealing with within about two conversations.
So the answer to "how do we stop overpaying in brokered processes" is usually not a negotiating answer. It is: have more real options. OmniSource is built around that — coverage across Off-Market, Pre-Market and On-Market in one pipeline rather than depth in whichever channel a firm happens to be strongest in.
One thing to be clear about, because it bears on how we work with intermediaries: BizNexus does not represent sellers, negotiate, structure transactions, or hold funds, and does not appear on engagement letters, NDAs, LOIs or closing documents. The intermediary who holds the engagement does that work. What we do is source, research, match, run outreach and chase process. How an engagement with us is structured and what it costs is published on biznexus.com, not here.
The short version
The broker channel is the market, not a compromise. Diligence the intermediary, set your number from the earnings before you see the ask, decide in advance what would justify going higher, and lose processes without flinching.
Be the buyer they want to call. Do not be the buyer who pays for the privilege.