5 Key Tips for Handling Potential Buyer Approaches

August 25, 2023

If you are a business owner and receive an approach from a potential buyer, it’s important to handle it with care. Asking questions and seeking professional advice can help you determine if the buyer is a strategic fit for your business and if a deal is achievable. Here are some tips on how to handle approaches from potential buyers:

Express interest in the potential buyer

Asking questions of a potential buyer can help you understand their motivations and ambitions. It’s important to know why they have approached you and what they believe makes a perfect fit with your business. You should also consider what needs the management and shareholders have in making an acquisition. Additionally, you should find out if the buyer has looked at potential sellers for some time or if they have only just started this process. Knowing these things will help you quickly determine if the potential buyer would be a strategic fit for your business.

What details should you provide them?

Before sharing further information, it’s important to appoint professional advisors who are well-versed in dealing with such approaches. They can help you assess whether a deal may be achievable, and what the hurdles and challenges may be. Additionally, they can help with valuing your business and how the sale process could develop. Working with a trusted business advisor will ensure you are in a position to see whether this would exceed your expectations.

Pay attention to the reasons why the buyer is interested in you, as that will help you know what information you need to provide to improve your attractiveness to the buyer and improve any offer made.

Maintaining confidentiality is of utmost importance

It is vital that confidentiality arrangements are put in place early so that information shared cannot be used to give the buyer a competitive advantage in the future if the deal is not complete. It’s important to minimise the risks of anyone else knowing about your buyer discussions. Staff or customers knowing before a deal is done can be disruptive to running your business.

Transitioning from an offer to heads of terms

Once confidentiality agreements are in place, you can share more detailed financial and management information, financial forecasts, and other key performance indicators that would allow the buyer to make an indicative offer. Care should continue to be taken on the level of detail provided. With further presentations and negotiation, the indicative interest can be converted into the agreed heads of terms for a potential deal.

Ask us

Unsolicited approaches may present an attractive opportunity and so should be followed up, but do not risk too much distraction as it can damage your business. Managing a sales process is a difficult and time-consuming task, and external assistance is advised. Appointing advisors as early as possible will help for improved negotiations, and a smoother process, as well as allowing you to keep on top of your day job.

If you have any questions or want to discuss further, please get in touch with a member of our team.

Chris Sellars

Chris leads a team specialising in M&A and financial Due Diligence services.

With a proven track record of successful transactions, Chris brings extensive deal experience and operational knowledge to assist clients in achieving their business objectives.

Matthew Milnes

Matt leads various projects, including company disposals through MBOs, trade sales, and EOT sales. He also oversees daily team operations and supports their learning and development.

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