Most M&A conversations start with the wrong question: "Should I hire a big bank or a boutique?" The more useful question, the one business owners rarely think to ask, is whether the advisor they're considering was actually built for a company their size.
Dan Gerron, Principal at Gerron Group LLC, built his practice around a structural reality in M&A: there is a defined gap in the market between what large investment banks will take on and what business brokers are equipped to handle. Knowing exactly where that gap sits, and how to serve the companies inside it, is the basis of his competitive positioning.
Key Takeaways
- Bulge bracket banks maintain minimum fees of $750K to $2M, making them economically impractical for most lower middle market companies
- Business brokers operate with templated processes that create a ceiling when deals become more complex
- Independent bankers positioned in the gap between these two groups can receive referral flow from both directions simultaneously
- Companies with $10 million or more in revenue often need operational support as much as transaction execution
- Building referral relationships above and below your deal range creates a pipeline that is validated before you've said a word to the client
The Economics of Why Big Banks Say No
Bulge bracket investment banks operate on a fee structure that simply does not work for the lower middle market. According to Mergers & Inquisitions, these firms typically maintain minimum fees in the range of $750,000 to $2 million, a threshold that makes a $10 million or $20 million revenue business an unworkable client relationship, not a strategic choice anyone has passed on. The economics do not support the engagement, so the mandate never gets offered.
This is not a secret. What is less understood is that it creates a structural referral pattern: larger banks regularly route deals downward to advisors who specialize in the segment they cannot serve. Dan Gerron has built those relationships deliberately.
"I have great relationships with other bankers (investment bankers that are bigger and with the brokers who are on the lower end), both of whom will refer deals to me that don't fit with what they're trying to do."
Dan Gerron, Gerron Group LLC
For independent investment bankers, that referral flow is not a windfall. It is a proof-of-concept: larger institutions are confirming, through their own client routing decisions, that this market exists and needs coverage. The question is whether you have built the relationships to receive those referrals when they are issued.
The Ceiling Business Brokers Hit
On the other end of the market sits the business broker segment, made up of advisors who typically operate in what researchers call the "Main Street" tier: companies with under $5 million in annual sales. According to CapitalPad, this segment relies on volume and templated processes, which works well for simpler transactions but creates a ceiling when deals become more complex.
When a company outgrows that template, meaning the transaction requires more sophisticated buyer outreach, operational analysis, or deal structuring, the broker's process stops being an advantage. At that point, the broker's existing client may be referred up to someone better suited to the complexity of the deal.
Companies caught between these two tiers generate $5 million or more in revenue, with deal complexity that exceeds what brokers are built for but deal size that big banks will not prioritize. They represent the core lower middle market. According to Axial, over 10,000 deals are brought to market through lower middle market channels annually. That is a market with real volume and real buyer appetite.
The Referral Network as a Competitive Moat
What makes this positioning durable is not just knowing where the gap is. It is receiving deal flow from both directions simultaneously (large banks route down, brokers route up), which means the independent banker is not competing against either group. He is positioned as the place both groups send business they cannot handle.
"Either they're too big for the brokers or they're too small for the bankers, or the business needs someone who can give them operational support. That's how I position myself."
Dan Gerron, Gerron Group LLC
This two-directional referral dynamic is worth examining carefully. Most independent bankers focus their business development on direct outreach to business owners or private equity buyers. Building referral relationships with firms above and below your deal range creates a different kind of pipeline, one where your positioning is validated by the referral source before you have said a word to the client. A business owner who arrives through a referral from a larger bank already understands why they are not there instead.
Operational Support as the Differentiator
The third leg of this positioning goes beyond deal size and referral relationships. It addresses the specific kind of help that these mid-tier revenue companies actually need when they go to market.
Businesses in the lower middle market are often transitioning from founder-led operations toward institutionally managed ones. They may carry revenue concentration risk, key-man dependencies, or operational gaps that need to be identified before a sale process begins. A buyer conducting diligence will find them regardless. An advisor who identifies them first, and helps address them early, changes the trajectory of the deal.
For independent investment bankers building a practice in this segment, that is the core value proposition: not just access to buyers, but the kind of hands-on involvement that a business at this stage of development actually needs to run a successful process. The advisor who can offer that, and who sits in the gap the big banks and brokers cannot reach, has a positioning story that speaks for itself.
Finding the right market position is only part of building a successful independent investment banking practice. Finalis gives independent M&A advisors the broker-dealer affiliation, compliance infrastructure, technology, and operational support they need to serve lower middle market clients and grow their firms.
Learn how Finalis supports independent investment bankers.
Frequently Asked Questions
What is the lower middle market in M&A? The lower middle market generally refers to companies with annual revenues between $5 million and $150 million, or enterprise values in the $10 million to $250 million range. Transactions in this segment are typically too complex for business brokers and too small for bulge bracket investment banks, making them a natural fit for independent or boutique M&A advisors.
Why won't big investment banks work on smaller deals? Bulge bracket banks typically maintain minimum fees of $750,000 to $2 million. For a company with $10 million in revenue, that fee structure represents an outsized percentage of transaction value, making the economics impractical for both the client and the bank. Most large banks focus on deals with enterprise values well above $250 million.
What is the difference between a business broker and an investment banker? Business brokers typically serve smaller "Main Street" transactions and use standardized processes suited to simpler deals. Investment bankers provide more tailored advisory services, broader buyer outreach, and more complex deal structuring. The distinction matters most for companies in the $5 million to $50 million revenue range, where deal complexity often exceeds what a broker's process is built to handle.
How do independent investment bankers get deal flow from larger firms? Large banks and business brokers regularly refer deals that fall outside their target range. Independent bankers who build relationships with advisors at both ends of the market receive referral flow from firms that consider the deal too small (large banks routing down) and firms that consider the deal too complex (brokers routing up). Building both referral relationships simultaneously creates a durable and defensible pipeline.
What does "operational support" mean in an M&A context? Operational support refers to advisory work that goes beyond transaction execution. For businesses preparing for a sale, this might include identifying revenue concentration risk, key-man dependencies, or gaps in financial reporting that could affect buyer diligence. Addressing these issues before a sale process begins often improves deal outcomes and reduces the likelihood of retrades during diligence.
Is there buyer demand for lower middle market companies? Yes. According to Axial, over 10,000 lower middle market deals are brought to market annually, and demand from private equity buyers, particularly for platform add-ons and tuck-in acquisitions, remains strong in this segment. Companies in this range attract a broad mix of strategic acquirers, private equity funds, and family offices.
The content provided is for general informational purposes only and does not constitute legal, regulatory, investment, or other professional advice. It is not an offer, solicitation, recommendation, or endorsement of any transaction, strategy, or regulatory framework. Finalis Securities LLC is a broker-dealer registered with FINRA and a SIPC member firm. Check out the background of this firm on Brokercheck.
© Finalis Securities LLC, 450 Lexington Ave, 4th Fl, New York, NY 10163, United States
.jpg)