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Dealing with unsolicited approaches from potential buyers

 

Posted on 10 March 2016

All too often the owner manager is approached out of the blue by a potential buyer offering to buy their business. It is flattering and the desire to engage and respond quickly can be strong. However a potential acquirer will rarely be able to put a credible offer on the table without a significant amount of sensitive information from the target business. This can result in a half-hearted information flow and ultimately disappointment for the owner manager as the offer that is returned typically does not meet with valuation expectations.

So how should you deal with an approach?

If you find yourself on the receiving end of an unsolicited approach from a potential acquirer here are some things you can do to put yourself in the best possible place:

  • Do not let the buyer dictate the pace - despite it being flattering to have received an approach from a potential buyer you should never rush into sharing lots of information with them, particularly financial information. It is crucial that you present the best investment case for the business, with mitigation of risks (or perceived risks) and an accurate reflection of the future performance of the business within a larger group.
  • Do a detailed review of your business - unsolicited approaches usually mean the business has not been prepared for sale, and timescales usually mean that it is too late to do any long term planning for exit now. Undertaking a detailed review of the business both financially and from a commercial perspective is usually time well spent before engaging with the buyer. The upfront identification of potential deal breakers is vital here.
  • Consider widening the process. If you are taking the approach seriously then you could quite quickly get to a point where you are committing to sell to the only buyer you have spoken to. This may be the best deal you are ever going to get but not having explored the wider market could be something that you regret later. There are a number of options here for widening a process quickly and efficiently.
  • Employ the correct strategy and tactics for the buyer. Conversely should you wish to concentrate on one buyer there are tactics you can employ to give the perception of a wider process, and therefore create the impression of competitive tension in order to drive value.
  • Appoint an experienced adviser to help you deal with the approach. They can be a sounding board, operate visibly ‘front and centre’ or invisibly in the background.
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