With M&A deal activity on the increase, unsolicited approaches are increasingly common in business sales – indeed almost inevitable in some industries. When interest or an acquisition offer turns up out of the blue, knowing what to do is a huge call – and business owners need to get organised fast. In this blog article we explain how to deal with an unexpected business purchase offer.
Surprise Offers
An unsolicited approach is an expression of interest or an offer to purchase your business when you haven’t expressed a desire to sell or deliberately advertised your business for sale. The interest is often in the form of an email, a letter, or cold call from the company involved or an advisor representing the investor.
Beware that some investors and advisors may just be fishing to assess your appetite with no serious offer intended. In our experience, when we’ve been appointed to support a business sale where an offer is already on the table, around 60% end up selling to a completely different buyer.
5 Top Tips for Dealing with an Unexpected Business Purchase Offer
1: Play for time
Even if you are desperate to know who wants to buy your business and what they’re offering, you must calmly take control of the conversation while taking care not to burn your bridges. Don’t feel flattered into progressing with this interest if you are not serious about them as a buyer.
Let them know that the business is not currently up for sale, but that you are open to further discussions in a say month or two. Suggest a date in the diary – you can always delay further or reschedule. A few weeks’ delay protects you from entering unguarded discussions about sensitive issues like financials, the team, and customers. Whatever you do, don’t comment on value expectations or preferred terms at this early stage.
Acquisition advisors will want to manoeuvre you quickly into signing an exclusivity agreement with the buyer, effectively shutting you off from speaking to other buyers for months.
2: Discuss with fellow shareholders if appropriate, or confide in a trusted friend/ partner
An out-of-the-blue approach offers business owners an opportunity to address exit aspirations. While some shareholders want to stay and pursue growth, others are ready for a change and open to acquisition. Sole shareholders often confide in a significant other. This is safer than discussing with a non-shareholding director or manager, who may be jittery about job security or status which will influence their opinion.
Step 3: Find an expert advisor
Even if you aren’t ready for exit and want to reject an offer, it’s worth using the opportunity to sound out professional advice.
A corporate finance advisor will help you assess the interested party, plus the valuation and terms if an offer has been submitted. They can also help you understand who else is acquiring in your sector, and what other likely buyers could be interested in the acquisition. There will be fees involved but a good Corporate Finance advisor will be able to maximise deal value and prevent erosion of terms in due diligence, so you will greatly benefit from their experience and handling of the deal.
Any serious acquirer will not be offended by you hiring an ‘exit’ team (appointing an advisor). It indicates that you are serious about discussing their interest or offer. They will likely have or plan to appoint expert advisors on their side, and you will have someone to respond to questions and information requests while you focus on the business.
4: Consider your options
With an offer of possible acquisition on the table and impartial expert advice, it’s time to construct a response. Active acquirers may also be talking to your competitors, and nearly all will start negotiations with a low-ball offer.
You should be in a position to accurately gauge:
- Your preferred exit timescales and value expectations
- Whether the interested party sees the true value in your business – current and future
- How long the sale process may take and how committed the buyer really is
- What will happen to your team under new ownership
- What moving on means for you, your family, and those close to you
5: Formally respond to the interest or offer
It is now time to progress or reject the interest or offer. Progressing still doesn’t mean entering an exclusivity agreement with the first acquirer who makes contact and wants to meet.
- You are now in a position to qualify the interest or initial offer
- Is it genuine or a fishing exercise?
- Are they pushing hard or sometimes go quiet?
You may choose to keep this interest on the table but instruct your corporate finance advisor to take control of discussions and let them know you will be talking to other acquirers. Learning what an acquirer is most interested in can help negotiations, e.g. your customer base, most valuable staff, the business location, growth opportunities etc.
Unexpected Business Purchase Offer – Key Takeaways
- Don’t rush into an exclusive talk with the first company who comes along
- Consider who else could be interested, remember competition, even the perception of competition, will help drive up price and improve terms
- Seek professional advice – appoint an advisor to help you
Talk to an Expert
To find out more about how The MGroup Corporate Finance team can help support your business sale, please contact Partner Geoff Pinder for a confidential discussion: g.pinder@themgroup.co.uk or 07717 874 357.