Selling a Privately Owned Business – Briefing 17 – Selling to an Unsolicited Buyer
In this last series of blogs we’re
looking at selling to different types of buyer. In this second blog, we look at
These essentially are any
external expression of interest, or indeed an actual offer received
unexpectedly. Here are some thoughts on how to deal with them.
- By their very nature you won’t have been
expecting the approach, and may well not know the interested party, so dealing
with it may feel both strange and indeed unwelcome – but it shouldn’t
necessarily be. It does mean that you
have been doing sufficiently well so that someone has noticed and is interested
in your business.
- You need to look at this in a logical and methodical
manner. Firstly, you need to think carefully and clinically about whether your
business may indeed be for sale.
- If the timing just isn’t right and you are
simply not for sale, then clearly you turn the approach away, but in a positive
manner, you never know when the time might be right and you may wish to resume
- If you weren’t thinking of selling, but the time
may well be right both for you and the business, then clearly you can progress
matters, bearing in mind the key points below.
- However, it’s unwise to progress any kind of
discussions with an unsolicited approach if you really don’t wish to sell, or
if you’re only looking for that irresistible Offer, as with an unsolicited
approach this rarely happens. Doing so
will take up significant time and effort with a very low likelihood of a
If however your careful
consideration confirms that you would countenance a sale, then you must proceed
carefully and methodically. Here are
some key points to bear in mind:
- Whilst you should remain positive, experience
shows that the odds of closing a deal from an unsolicited approach are
generally pretty slim, partly because that kind of approach is opportunistic
rather than strategic.
- So the first thing is to determine how much you
know about the potential buyer, not only their actual ability to complete an
acquisition but the kind of business they are, how the businesses might fit
together in future and other practical aspects.
- You always need to be careful that this isn’t
simply a “fishing expedition” and that you are not just one of a number of
businesses which are similarly contacted in the hope of one achieving a quick
and cheap deal for the buyer.
- You must certainly be extremely careful about
confidentiality, one of the first things to do is to get a full non-disclosure
agreement (NDA) before you part with any meaningful information.
- A further key issue is the question of
value. It is axiomatic that offers from
unsolicited buyers reflect their own agenda, and not the market worth of your
business. The nest key step for you is
to determine what your business is worth to you, both in terms of ongoing
future income and also on sale.
- It may well be that the approach is genuine and
worthwhile, but nevertheless, proceed with caution. The key issue remains to
achieve the proper value for your business and not a value based on the
unsolicited buyer’s views. Some form of
even limited marketing to establish at least in some measure the market value
of the business is really essential.
- At this point, normal professional advice is
always to seek specialist help to determine potential market value, not least
so that you can then enter negotiations with the unsolicited buyer from a
position of strength. You will clearly have been sufficiently successful as
business owner to have reached a point where a potential buyer is interested in
you, but when it comes to a sale, basically you don’t know what you don’t
- As negotiations progress you need to be clear
about what the buyer wants from the business, and in particular from you as
owner. For example, one key issue for
most entrepreneurial owners is the concept of working for somebody else, after
so many years of working for yourself.
- Finally, don’t do anything or divulge material
or detailed information until you have a formal written Offer and a signed
confidentiality agreement. You, not the
buyer, must control the process, and remember that it’s easier to walk away
early than allow things to progress until it’s too late.
As always, assembling an
experienced team to assist with serious negotiations is massively helpful to
achieving a successful outcome.
20 December 2019