Brokerage Circumvention: The Fastest Way to Destroy a Deal—and Your Reputation

Brokerage Circumvention: The Fastest Way to Destroy a Deal—and Your Reputation by Dr. Allen Nazeri M&AMI

In the world of mergers and acquisitions, few actions are as reckless—or as self-destructive—as attempting to circumvent your intermediary. While most sellers act with integrity, every so often someone gets tempted by the illusion that they can “save the fee” and take their deal directly to the buyer.

What they don’t realize is this: circumvention is not only unethical—it is legally dangerous, structurally damaging to the transaction, and reputation-destroying for both the seller and the buyer.

A moment of poor judgment can permanently stain a founder’s reputation, jeopardize the deal, and even expose both parties to severe financial and legal consequences.

CIRCUMVENTION: What It Really Means in M&A

Brokerage circumvention occurs when a seller (or buyer) intentionally bypasses the intermediary—whether a broker, M&A advisor, or investment bank—to avoid paying fees or to negotiate directly behind the intermediary’s back.

In practice, circumvention usually happens when:

• A seller is negotiating a partnership or partial merger with a larger strategic buyer

• A buyer and seller start “side conversations,” thinking they can rewrite the relationship

• Someone involved believes the broker “didn’t do much” and tries to avoid the fee

What actually happens is far more serious.

CIRCUMVENTION: The Legal and Financial Consequences

Circumvention is not a “misunderstanding”—it is a breach of contract, plain and simple.

Every legitimate intermediary agreement includes:

• Confidentiality clauses

• Non-circumvention and non-bypass clauses

• Procuring cause standards

• Fee protection provisions

• Tail periods

• Successor liability

Your provided NDA, for example, explicitly binds the party to confidentiality, restricts disclosure of information, and establishes the intermediary as a protected party in the process. Circumvention violates the spirit and structure of such agreements. (See NDA reference: )

Beyond this, courts across multiple jurisdictions have consistently upheld broker fee rights, awarding damages for:

• Lost commissions

• Legal costs

• Punitive damages for bad faith

• Interest on unpaid fees

• Additional damages for reputational harm or tortious interference

Notable case examples that courts have ruled on (generic summaries for compliance purposes):

• Business brokerage firms awarded full commissions even when sellers attempted to “drop the broker” and close directly with the buyer.

• Investment banks awarded fees when companies closed with a buyer introduced during the engagement, even if negotiations appeared dormant.

• Advisors granted punitive damages when sellers intentionally interfered with the broker–buyer relationship to avoid paying commissions.

Courts do not tolerate circumvention. It is viewed as intentional fraud.

CIRCUMVENTION: What It Signals to Your New Strategic Partner

The most overlooked consequence is also the most damaging: What message are you sending to your future partner?

If you circumvent your intermediary, you are telling the buyer:

• “I’m willing to break contracts.”

• “My word doesn’t hold when money is involved.”

• “If I did it to them, I can do it to you.”

Ethical buyers—especially strategics, private equity firms, family offices, and institutional investors—do not want to enter a relationship with a founder who starts the deal with moral ambiguity or legal exposure.

Strong buyers walk away immediately.

And if they don’t?They inherit your liability.

That means the buyer themselves can be named in:

• Broker fee lawsuits

• Claims of tortious interference

• Claims of unjust enrichment

• Claims of conspiracy to circumvent

• Breach of confidentiality

Any buyer who knowingly circumvents a broker is equally liable—and the M&A community has a long memory. Once your name is tarnished, no broker, banker, or intermediary will risk working with you.

CIRCUMVENTION: How Sellers End Up Exposed to the Entire Market

Many founders don’t realize that attempting to circumvent the intermediary also exposes them to severe reputational and structural damage, including:

1. Becoming “Shelf-Worn”

When a seller bypasses the broker and the issue escalates, the deal inevitably becomes public—at least within the broker and investor community. Word spreads quickly:

• “This company tried to cut out their broker.”

• “Founder breaching agreements.”

Soon the company is viewed as toxic or overpriced, and the valuation drops dramatically.

2. Accidentally Telling the Entire Market Your Company Is for Sale

When brokers take legal action, the seller inadvertently signals:

“My company sold for millions” or“My company is currently for sale.”

This is disastrous for:

• Employees

• Competitors

• Referral sources

• Payors

• Vendors

• Key managers

3. Opening Themselves to Multiple Additional Lawsuits

Circumvention doesn’t just expose you to the broker.

It exposes you to claims from:

• Co-founders

• Silent partners

• Investors

• Family members

• Noteholders

• LPs

• Shareholders

Once one party files suit, others follow.

CIRCUMVENTION: Why Buyers Should Avoid It at All Costs

Some buyers get tempted when sellers suggest “let’s do this ourselves.”

This is a trap.

Buyers who participate in circumvention risk:

• Full joint liability with the seller

• Payment of the broker’s commission anyway

• Damaged credibility with all future intermediaries

• Being blacklisted by investment banks and brokers

• Losing future deal flow in the industry

A buyer who knowingly circumvents a broker is treated as a bad-faith actor, and word travels quickly across the M&A community.

No one wants to work with a buyer who tries to steal deals.

CIRCUMVENTION: The Ethical, Professional, and Practical Reality

If you are working with a business broker, M&A advisor, or investment bank, one reality is universal:

You would not be in front of a strategic buyer, PE firm, or institutional investor without your intermediary.

Intermediaries provide:

• Buyer sourcing

• Valuation analysis

• Financial preparation

• Negotiation

• Deal structuring

• Risk mitigation

• Reputation protection

• Competitive tension

• Higher enterprise value

Trying to cut them out is not only unethical—it is irrational.

CIRCUMVENTION: A Final Message to Sellers and Buyers

A successful deal requires integrity, professionalism, and respect for the process.

Circumventing your intermediary:

• Damages your reputation

• Kills deals

• Scares away quality buyers

• Invites legal action

• Exposes both parties to liability

• Destroys trust in the market

• And almost always ends up costing far more than the commission you tried to avoid

In M&A, reputation is currency.Once you lose it, there is no earn-out rich enough to buy it back.

If you value:

• Your legacy

• Your valuation

• Your credibility

• And your future partnerships

Then do the right thing: honor your agreements, respect the intermediary, and treat the process with the professionalism it deserves.

Dr. Allen Nazeri, aka "Dr. Allen," boasts over 35 years of global experience as a healthcare entrepreneur. He is the Managing Director at American Healthcare Capital and Managing Partner at PRIME exits. Dr. Allen provides strategic growth consulting to leadership teams of both privately held and publicly listed companies, ensuring their preparedness for successful exits.

Dr. Allen holds a Dental Degree from Creighton University and an MBA in M&A and Investment Banking from the University of Bedfordshire. He is also a Master Certified Intermediary (M&AMI)

, a prestigious designation awarded to a select group of M&A advisors who have demonstrated exceptional negotiation skills and successfully led large, complex middle-market transactions to close.

Dr. Allen is the author of "Value Engineering: Strategies to 10X the Value of Your Clinic and Dominate the Market!" and the brand new book "Selling Your Healthcare Company at a Premium". Dr. Allen offers a free valuation to business owners ready for a partial or complete exit strategy. Dr. Allen collaborates with strategic buyers, private equity firms, and institutional investors, taking direct accountability for the annual successful sell-side representation of nearly $750M in enterprise value.

To have a confidential discussion about your company and receive a free valuation, please email Allen@pexits.com

You can now communicate with Dr. Allen's clone https://www.delphi.ai/drallen