What to do if you’re approached by a buyer for your business

An unsolicited approach from a potential buyer can be flattering and unsettling in equal measure for a business owner.

If you have been approached by a buyer, how you respond in the first few days can shape the value you achieve and how the process runs from there.

Our experienced corporate finance team share some insights on what to do next if you are approached by a buyer out of the blue.

Do not rush to engage with the buyer

There is rarely any need to respond immediately to an offer from a prospective buyer, even if they do set an artificial deadline.

Exiting your business is a big decision and something you have probably considered throughout its lifecycle, so take time to consider whether you are genuinely open to a sale.

You should also start to think about what your business might realistically be worth and what you would want from a deal before you have any substantive conversation with the buyer.

If there is a clear offer on the table, it doesn’t hurt to get a valuation of your business to see if it is fair before responding.

Establish who you are dealing with

Not every approach is what it first appears, especially if there are brokers or other parties involved in the initial offer.

Understand who the buyer is and try to get a clear picture of their intentions. In some cases, where you are approached directly by a competitor, it may seem fairly clear, but in other instances things may not be as black or white.

You should investigate how the approach was funded and whether they have a credible track record of completing deals of this size.

A well-resourced strategic buyer will behave very differently from an opportunistic party testing the market.

Protect your information

Before sharing any financial or commercial detail, put a non-disclosure agreement (NDA) in place.

Enquiries may seem innocent, but the information you provide can have considerable value to others, so speak to a solicitor to get one in place, alongside your heads of terms.

Any NDA should cover how your information can be used, who within the buyer's organisation can see it and what happens to it if talks do not proceed.

Bring in advisers early

Corporate finance advisers, and the other professionals they work with, deal with approaches like this regularly and can assess the credibility of the buyer from the start.

Professional advice can also help you understand an appropriate valuation range, evaluate different deal structures and manage negotiations more effectively.

Having experienced advisers involved early can help protect business value while allowing you to remain focused on running the company.

Remember, an initial approach from a buyer does not obligate you to sell the business you have worked so hard to build.

How can we help

Our Corporate Finance team advises business owners throughout the transaction lifecycle, from assessing unsolicited approaches and business valuations through to negotiations, deal structuring and completion.

If you have been approached by a potential buyer and would value a second opinion before responding, please get in touch with our Corporate Finance team. 

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