You may not even be considering selling your business when you suddenly receive an offer from another company interested in buying it. Depending on how you feel about selling your company, this may be jarring or exciting. Irrespective of how you interpret the prospect, it is important not to get too deep into the conversation. In addition to potentially disclosing sensitive information, you may actually compromise your company’s bargaining power by revealing too much. Here are some tips on what to do when you get an unsolicited offer:
First and foremost, be careful about how much you divulge to the person who has reached out. You may not know this person’s role in the potential transaction or if it is even a legitimate offer from a legitimate business. It is obviously important to be polite and exhibit some gratitude at the interest, but it is more important to arrange for the discussion to continue at a later date. There will be some paperwork you will want filled out before any real negotiations take place, and it is probably best to allow a representative to handle the initial talks.
Request a Confidentiality Agreement
A confidentiality agreement will be the first piece of paperwork that you absolutely must request that the other party sign. It would be rather difficult to have a meaningful conversation without knowing for sure whether the information you reveal will be given to some other party or used against you in some way. A genuine buyer will not balk at this sort of request. If anything, someone with a sincere interest will even suggest signing one.
Refer Them to Your Advisor
In order to get the best deal possible, your business must seem desirable. One way to demonstrate the company’s desirability, even if it is not totally the case yet, is by having an M&A advisor at the ready to discuss any potential sale of the business. Granted, generating interest in the business may not occur until after there is one offer on the table, but it is always best to let a seasoned expert navigate this process. Even if a prospective buyer knows or senses that there are no other buyers knocking down the door, they will certainly respect your company as serious and professional if you have a knowledgeable advisor handling the situation.
Evaluate Other Possibilities
Once you get a purchase offer and start thinking about whether you are ready and willing to sell, it is probably a good idea to test the waters elsewhere. It is rarely smart to jump at the very first opportunity, unless it is simply too amazing to pass up. However, it is far more likely that you will want to see what else might be available before committing to the first thing that crosses your desk. This is where having one or more advisors will be incredibly helpful, as they should have connections to other possibilities and can help with gauging the level of interest.
Go For It?
It is clearly wise to proceed with caution when considering selling your business, especially if the sale arose completely unexpectedly, but that does not mean that you should not be excited. An unsolicited offer can help you realize the value of your company and perhaps motivate you to put it into an even better position to sell. It is usually pretty flattering when another company is interested in purchasing what you have built, and if things fall into place in a way that you are comfortable, then it may be worth it to go for it.