Why should you run a broad auction when selling your business?
For Canadian owners of privately held companies generating $5 million to $50 million in revenue (typically $1 million to $10 million in EBITDA), selling is a high-stakes endeavour where surprises lurk at every turn — regulatory snags, due-diligence revelations, market volatility and buyer dropouts. A broad auction run by an experienced M&A intermediary markets your business competitively to a vast pool of buyers, creating leverage while your advisor anticipates risks, mitigates them proactively and steers through even the most unexpected eventualities.
What is a broad auction? A structured, competitive sell-side process that markets your business to hundreds or thousands of strategic acquirers and financial buyers globally, fostering bidding wars while building in redundancies for dropouts. Its stages are preparation (a robust Confidential Information Memorandum), marketing and outreach (vetted buyers under NDAs), bidding rounds (indications of interest and letters of intent), and negotiation and closing with backups ready.
The intermediary's role — beyond running the auction, an experienced advisor anticipates pitfalls owners may never foresee, such as hidden tax liabilities or integration mismatches, drawing on Canadian-specific knowledge of tax codes, provincial regulations and cross-border nuances.
Why it works
- Maximizes price while shielding against valuation surprises through benchmarking (4 to 8 times EBITDA) and normalized financials
- Accesses diverse buyers to counter dropouts and financial or geopolitical volatility
- Maintains strict confidentiality through phased NDAs to prevent leaks and disruptions
- Streamlines operations to avoid owner distraction and performance dips
- Secures favourable terms (earn-outs, protections) and mitigates post-closing disputes
- Enhances leverage and closing certainty through built-in optionality and backup bidders
- Tailors to Canadian dynamics: the Investment Canada Act, antitrust reviews and capital gains exemptions
Fees and return on investment — auctions take 6 to 12 months, with success fees typically ranging from 3% on larger deals to 7% on smaller ones, plus retainers. The payoff can be substantial: on a $2M-EBITDA business valued at 5x ($10M), lifting the multiple to 6x ($12M) adds $2M; even a 5% fee ($600,000) nets $1.4M — a high return on investment.
Key facts: running a broad auction
A broad auction markets competitively to hundreds or thousands of strategic and financial buyers
Targets Canadian businesses with $5-$50M revenue and $1-$10M EBITDA, benchmarked at 4 to 8 times EBITDA
Benefits: higher price, buyer diversity, confidentiality, leverage, closing certainty and Canadian compliance
Timeline 6 to 12 months; success fees ~3% to 7%; a one-times EBITDA uplift far outweighs the fee
Disclaimer: This article is for general informational purposes only and does not constitute legal, tax or financial advice. Consult qualified advisors regarding your specific circumstances.
