What to do if you receive an unsolicited offer
for your business
Over the years, we have be contacted by numerous business owners that are in a panic because they have been contacted “out of the blue” by a potential buyer for their business and don’t know what to do. Usually the potential buyer is a competitor, or if the business is large enough, it might be a Private Equity Group (“PEG”). Additionally, it might be a solicitation by an intermediary firm indicating that they have a buyer that is interested in acquiring the business. In today’s world there are business lists available and it is fairly easy for buyers to buy a list and go fishing for deals. The frequency of these types of contacts is increasing.
Be Prepared – In Advance
The first thing to do is to be prepared by knowing what your business is worth and if you can afford to sell after paying off debt, fees, and taxes. Ideally, you know whether or not you and your business are prepared to engage in discussions. If it is not the right time for you to sell or if your business is not positioned to obtain optimum value, it is probably best to capture the buyer’s contact information and delay discussions, until the time is right for you.
It Takes a Team to Do it Right
However, if you believe that the time is right and you have been positioning your business to go to market, you should have the buyer execute a Confidentiality Agreement (“CA”). We recommend that you obtain a CA from your attorney rather than pulling one off the internet or using one supplied by the buyer, as there are some significant nuances in CAs that can be traps for the unwary. This is particularly true if the potential buyer is a competitor. At some point in time the identities and details relating to your vendors, employees, and customers will be revealed to the buyer, potentially putting your business at risk. Having an experienced advisor knowing how and when to proceed can be invaluable at this point. Remember the buyer may have engaged in this process many times and a typical tactic is to isolate the target company to obtain a below market value on terms favorable to the buyer. Having a team of advisors to assist in this process is critical. Usually the team would consist of at a minimum of your CPA, a transaction attorney, and an intermediary, but might also include your wealth planner, banker, and insurance professional.
Proceed in a Disciplined Manner
It is important to remember that the sale of your business may be the largest and most significant financial transaction of your life, so it is important to proceed in a disciplined manner with a team of experienced advisors.
March 1st marks the 37th Anniversary of the founding of our firm and I have been blessed over the years to be surrounded by a great team of coworkers, wonderful clients, and talented professionals involved in the over one thousand transactions that we have completed to date.
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.