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Insights · The deal itself

The broker red flags a seller should watch for: seen from the buyer’s chair, where they show

By Reetika Gupta and Varun Mahajan

◆ What this piece is: a field guide to bad intermediary behavior, written from the seat where it shows: across the table. What it is not: anti-broker. Most brokers we deal with are honest, and a good one makes deals better for everyone at the table, including us. We are a buyer with our own angle here, named plainly below. Education, not advice.
If you read nothing else

Most brokers are honest. The bad ones are visible from across the table: the flattering valuation that wins the engagement, the fee that pays on any close, the packaged financials a buyer re-derives in a week. Interview the intermediary the way you would interview a buyer: starting with how they are paid.

The uncomfortable thing first: the bad broker does not look bad to you. He looks bad to us. To you he shows his best face: the confident valuation, the buyer pipeline, the reassuring process. The face a buyer sees across the table is the working one: how the financials were packaged, how urgency gets manufactured, how a wobbling deal gets pushed. A seller hires an intermediary precisely because this is unfamiliar territory, which means the seller is the person least equipped to judge the performance, and the buyer, who sees a dozen processes a year, is the person most equipped. So take this for what it is: a buyer describing what a fee-driven process looks like from the outside, so you can recognize one from the inside.

And hold the frame while you read: most brokers are honest. This piece is not anti-broker; it is anti-bad-broker. The good ones will recognize every flag below, because they spend their careers refusing to do these things.

Start with the fee, because everything follows from it

Almost every flag on this page grows from one structural fact: the standard brokerage fee is a success fee: a slice of the transaction, paid when, and only when, a deal closes. Read that carefully. It pays on any close, not your best close. It pays the same whether the buyer keeps your people or guts the place the following Monday, the same whether the price held from LOI to closing or got chipped down in month three. A good broker rises above that incentive out of professionalism and reputation, and many do, every day. But the incentive does not reward them for it, and a bad broker is simply one who follows the fee wherever it points. Understanding whose interest each structure serves is not cynicism; it is the reading skill this entire decision runs on.

FEE STRUCTURES, WHAT EACH ONE ACTUALLY REWARDS Success fee only, paid at close, on any close Retainer plus success fee Fee-for-work advisory, no slice of the deal Rewards: a closed transaction, soon. Not your best price, not the right buyer, not certainty it should have closed at all. The pull: strongest at the end, push the wobbling deal, take the chipped price, meet the fee milestone. Watch behavior hardest in the final month. Rewards: doing the work either way; the close still pays most. The retainer buys some independence, a broker who can afford to tell you to wait. The pull: smaller, still real. The blend matters: the more the close pays relative to the work, the closer this sits to the row above. Rewards: the advice itself. Whoever is paid this way loses nothing by saying “don’t sell,” “not this buyer,” or “wait a year.” The pull: different, not absent, hours can expand, and advice can hedge. No structure removes interest. Every structure tells you where to look for it. No percentages here on purpose, the structure decides the pull; the rate only decides its size.
FIGURE 1Whose interest each structure serves. The question for anyone advising you on a sale (broker, banker, or a buyer writing articles) is the same: what do they get paid for, and when?Method: a structural comparison only; no rates or percentages stated. Engagement terms are your attorney’s reading.
The reality gap
Today
You would know a bad hire in your own trade in five minutes; intermediaries feel harder to read.
The gap
The tells are the same as in any trade: incentives, record, and what is promised versus what will be signed.
What’s possible
You choose an intermediary (or none) knowing exactly whose interest each fee serves.
The first move
Before interviewing anyone, write down how each candidate is paid, by whom, on every possible outcome.

The flattering number that wins the engagement

The most expensive flag hides in the friendliest moment: the pitch. To win your engagement, a broker must beat the other brokers you are interviewing, and the easiest way to win that contest is to name the biggest number. So a certain kind of broker quotes a valuation no serious buyer will ever pay: not because he believes it, but because it wins your signature. Then, once you are under an exclusive engagement, reality is administered in doses. The number is “adjusted for market conditions.” Then it is “refined based on buyer feedback.” It walks down, month by month, until it lands where a real buyer was always going to be: except you have now spent most of a year, told your key people, and psychologically committed to a figure that never existed. From our chair this move is unmissable, because we are the ones who decline the early number and watch the asking price descend toward us.

THE FLATTERY, THEN THE WALK-DOWN QUOTED “VALUE” MONTHS UNDER THE ENGAGEMENT → The number that won the engagement Higher than any serious buyer will pay: it beat the other brokers, not the market. “Adjusted for market conditions” “Refined on buyer feedback” Where real buyers were all along, reached late, after months burned and commitments made on a fiction. The defense costs one sentence in every pitch meeting: “Walk me through how you got that number.” A defensible valuation has a derivation. A pitch number has a shrug. ◆ heritageplatformgroup.com · Heritage Insights
FIGURE 2The walk-down, drawn. No numbers on the axis on purpose: the pattern is the tell, whatever the figures. The number that wins a pitch contest and the number a buyer will pay are found by two different methods, and only one of them survives contact with a closing table.Practice: a pattern, not a claim about any broker, engagement, or business.

The other tells, and what the good ones do instead

Three more flags show clearly from our chair. Packaged financials: when a summary arrives over-produced (aggressive add-backs, adjusted earnings with no bridge back to the tax returns), buyers do not think “professional.” They think “what is the packaging hiding?” and discount accordingly. Polish that lowers trust lowers price. Auction theater: manufactured bid deadlines, hints of phantom buyers, rounds staged for drama. Serious buyers have seen real competition and can smell staged competition, and the best ones simply leave, so the theater meant to raise your price quietly drains your pool of exactly the buyers you wanted most. Pressure at the milestone: when the push to accept the first LOI arrives just as a fee milestone or a quarter’s end approaches, ask whose deadline you are actually meeting. A good broker does the opposite at every point, and the contrast is the cleanest test there is.

THE SAME JOB, DONE TWO WAYS A good broker A bad one Qualifies buyers, proof of funds and seriousness before your data moves. Protects confidentiality: your team, customers, and competitors learn nothing until they must. Keeps alternatives warm so no single buyer ever holds all the leverage. Prices from a derivation they will defend line by line, and revise openly if the facts change. Tells you no: wrong buyer, wrong time, wrong price, even when no costs them the fee. That sentence is what you are really hiring. Blasts your teaser wide and lets tire-kickers into the data room. Confidentiality as a slogan, until a competitor calls your best customer with the news. Rides one buyer to a fast close and lets your alternatives go cold. Prices from the pitch contest, then walks the number down in doses once you are locked in. Never says no. Every buyer is “strong,” every offer “worth taking seriously,” every deadline “critical”, because the fee pays on any close.
FIGURE 3The cleanest interview question a seller can ask: “Tell me about a deal you advised a client not to take.” A good broker has stories. A bad one has a pause.Practice: a behavioral contrast, not a claim about any individual or firm.
The honest con: our angle on this subject is real, so subtract it

Heritage is a buyer, and brokers sit across the table from us, which gives us two interests you should name before weighing a word of this. A wide, well-run competitive process is genuinely good for a seller chasing the top price, and it is exactly what a long-term buyer like us would prefer you not run, because we are rarely the highest bidder in one. And a seller made warier of intermediaries is a seller more open to dealing with a buyer directly. Both pulls are real; subtract them and the flags above still stand, because every one is verifiable by you without taking our word. It is also true that a good broker makes deals better for us (qualified conversations, honest numbers, a process that closes) and we have said so to their faces. Our record is what it is: our principals and partners have acquired and operate three businesses; beyond them, nothing we can point you to yet. We charge no success fees on anything, and our advisory work is walled off from our buying, which is our structure, carrying its own interests, read it the same way you just read theirs.

Put the thinking to work

Our interest: A buyer benefits when you skip intermediaries entirely, and we are a buyer. A good broker running a competitive process is often exactly what beats us.

Where to go from here

Compare the decision, the ownership paths and what should carry forward.

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Capital considers acquisitions as a principal buyer; it does not represent a seller or broker a sale. Service work, The Read included, is a separate relationship: if we become interested in buying a business we are working with, we stop that work and tell the owner plainly before any purchase discussion begins. The Read is optional when a broader diagnostic would help. We agree scope, timing and fees before service work begins.

This article is educational. It is not individual legal, tax or investment advice, an offer or a promise of results. Your accountant, attorney, and family make every real decision with you.