How to Handle an Unsolicited Acquisition Offer

By Tim Moore, an EO Houston member and managing shareholder of Doeren Mayhew

It’s a scenario I hear about often, and increasingly so as the mergers and acquisitions market continues to heat up: A buyer approaches your business with what sounds like a once-in-a-lifetime offer to purchase it. Such offers are fairly common, and while some represent great opportunities, beware. There are several questions to ask to help determine whether it’s the right time for you to sell, including:  

  • Do you know your value? Unless you understand your company’s value in the current market, you can’t possibly decide whether a bid is fair. You’ll want an appraisal of your business, including a review of financial statements, assets and intellectual property, as well as research on recent sales of similar companies in your industry.
  • What’s your buyer’s strategy? Does the buyer operate strategically and pursue only those companies that offer cost synergies and whose products and services complement its own? This type of buyer is more likely to pay a higher-than-market rate for an acquisition it really wants. Or, is the bidder interested in buying your company as cheaply as possible so it can resell it in a couple of years? Price negotiations with these “financial” buyers may be less successful compared to other buyer types.
  • Does the buyer have the means to purchase your business? To ensure an unsolicited buyer can put its money where its mouth is, you’ll want to determine whether the buyer is well capitalized or overleveraged. Without cash for the acquisition, bank financing will come into play, which can be tough in the current market.
  • Could fraud or unfair dealings be in play? A buyer might have a history of trying to snap up businesses on the cheap or through hostile bids, or may be known for not honoring preliminary agreements. It’s usually best to walk away from such buyers.

For more tips on how to handle acquisitions, contact Tim today!

Categories: FINANCES


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