How to deal with an unsolicited offer to buy your business
If a buyer approaches about buying your business, how should you respond? It’s not uncommon for business owner to receive unsolicited offers to purchase their company. They can come from both financial and strategic parties. How should you handle it? What steps should you take? Here is what you need to consider and how we can help.
Many acquiring companies try to grow through M&A, approaching companies directly. This is beneficial for the buyer as the process isn’t competitive, there are the only interested party and this strengthens their negotiating position.
But what are the next steps when someone offers to buy your business?
1. Check your expectations
Understand how much your business is worth, so you can determine how competitive potential offers are. Making a list of questions and concerns will provide a framework to determine if the unsolicited offer is even worth considering. For example, here is a list of typical questions a business owner will have:
Do I want to sell?
How much is my business worth? How do I know?
If there is one interested suitor, are there others? If others, how do I find them? Would they be willing to offer a better deal?
What will be required to execute a sale? Who will help me manage the sale process and execute the deal while I run my business?
Who will run the business after I sell it? Am I willing to remain involved?
Whether you have the answers to all these questions or not, there are things you should keep in mind before engaging with an unsolicited offer.
2. Don’t share too much/ Just start a conversation
Usually, potential buyers will want to understand more about your business (i.e. business model, revenue, profit etc) before making an offer. So before having this conversation get a confidentiality or non-disclosure agreement (NDA) in place. Starting a conversation is the perfect start to learning both sides of the table, so you can learn more about the interested party also. What are their plans for your business? How does your business fit with theirs?
Be cautious to only share information which is absolutely necessary during early discussions as you may be approached by numerous competitors.
3. Understand the timeframe
M&A is time consuming and negotiating with buyers can distract your attention away from the daily running of your business – understanding their timeframe is important. Buyers like a long and detailed process without any competition, they like to dictate the pace. We can establish a reasonable timeframe for you and the prospective buyer to move a deal forward or wrap up discussions.
How we help and create value
Even though unsolicited offers put a deal at a more advanced stage than if you initiated the sale, the PKF Corporate Finance team can still create significant value in numerous areas.
1. Assist with negotiations
Using PKF as an intermediary in M&A discussions, we bring professional experience and expertise and provide significant value by helping you understand all your options and help you avoid making any irrational decisions. We change the dynamic of negotiations to create a sense of competitive tension for the buyer. We can assist with negotiations, as well as managing the sharing of information so you don’t share too much, too soon.
2. Letter of Intent (LOI) appraisal
If the discussions proceed further to the offer stage, PKF help in reviewing offer letters and their terms. As the letter of intent gives the buyer access to your financial accounts to do their due diligence, it is important that PKF are there to help appraise the competitiveness of the offer, as well as review and negotiate all the terms within the offer.
3. Introduce competitive offers
PKF have a lot of clients in different areas so if required, we can quickly identify additional, likely buyers from our database of contacts and companies, creating a competitive element to the deal.
4. Manage deal closing
M&A can be time consuming for a business owner, having the capacity to focus your time running your business during the sale process better ensures the likelihood of a closed transaction. When businesses underperform during a period of scrutiny like this, it can break the deal.
The PKF Corporate Finance team can manage the deal workload for you, and work with the advisors to get the deal agreed and signed. We will keep you in the loop at all stages of the process, whilst letting you focus on running your business.