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What to do when you get an unsolicited offer to buy your company

What to do when you get an unsolicited offer to buy your company

Public and private companies currently have nearly $2 trillion in cash on their balance sheets.  US private equity funds have an additional $500 billion in committed capital.  With economic growth expected to continue at 2 - 3%, companies with available cash are going to be making a lot more unsolicited offers for strategic acquisitions to ramp up growth.  As a result, business owners shouldn’t be surprised to receive a call from someone interested in buying their company.  So when you get that call, what should you do?  And equally important, what shouldn’t you do?

Tip #1 – Skilled buyers have help; you should too.  Even a one-on-one process is very time consuming and follows an established protocol.  Working with a team – your accountant, your lawyer and an experienced M&A advisor – can help you more quickly sort out the contenders from the pretenders, provide the right information at the right time, and give you an important sense of fair pricing and payment terms.

Tip #2 – Create a timeline.  Buyers like a long and detailed process without any competition.  They like to dictate the pace.  Your team can establish a reasonable timeline for you and the prospective buyer to either move a deal forward or wrap up discussions.  

Tip #3 – There’s no such thing as a stupid buyer.  To get to a closing, every buyer will have their own accountant, lawyer, banker and advisor that will insure they pay no more than a fair price.  Before engaging a prospective buyer, it’s important for you to know what the fair price and payment terms are for a business your size.  If the price and payment terms will achieve your financial goals, participating in a buyer/seller discussion could make sense.  If the only way you’d sell now is by getting “an offer you can’t refuse”, it’s best not to commit your valuable time and attention to a lengthy discussion that won’t result in a closing.

Lingate Financial Group helps business owners respond effectively to unsolicited inquiries from potential buyers – similar companies in a different geography, competitors, private equity groups, partners, management, family members, and others.  Each type of buyer presents unique challenges in order to arrive at a fair deal.  Lingate is able to tailor a process and hourly fee structure to meet your needs and accomplish your goals.  Please call us at 763-546-8201 for an informal visit now, or when that call comes.

Greg Loeschke