Unsolicited Acquisition Offer? Turn to an M&A Advisor
It is a scenario the M&A advisors at Doeren Mayhew Capital Advisors see often – a buyer has approached you with what sounds like a once-in-a-lifetime offer on the purchase of your business. Or, perhaps it’s a lowball, “tire kicker” offer, and you are not sure how to respond. Unsolicited acquisition offers are fairly common, and some represent excellent opportunities, but caution is certainly warranted. Anyone might approach you, and if your company isn’t already on the market, you probably aren’t in the position to screen buyers or evaluate offers.
An M&A advisor can help you determine whether a bidder is serious and whether selling now is in your best interest, including:
Understanding seller value. Unless you understand your company’s value in the current market, you can not possibly decide whether your bid is fair (though it probably is not, since buyers typically do not offer more than they have to pay). Mergers and acquisitions advisors will help you analyze the value drivers within your business, and in the case of a strategic buyer, help you determine expected buyer synergies.
Recognizing the buyer’s strategy. Is the buyer a financial buyer looking to consolidate an industry sector? Or, is this the first acquisition for a private equity group/fund? The answer to this question might significantly affect their price. If the knock is from a strategic buyer, understanding the buyer’s motivation can be rather illuminating (and valuable). Is the strategic buyer looking to enter a new market? Or perhaps eliminate a costly competitor? Is the buyer hoping to realize synergies from the transaction?
Determining buyer’s ability to purchase. To ensure an unsolicited buyer can put his money where his mouth is, your advisor will find out whether he is well capitalized or overleveraged. If the buyer happens to need financing for the transaction, that is not nearly as potentially problematic as it was a couple of years ago.
Screening for fraud and unfair dealings. 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 is usually best to walk away from such buyers.
Entering into discussion with either a financial or strategic buyer must be done on a confidential basis. However, once your confidentiality agreement is inked, actually determining which information to share – and more importantly, when to share potentially sensitive information – is one of the most important facets of the deal, and one we pay particular attention in order to avoid unfair dealings.
For assistance evaluating unsolicited acquisition offers, contact Doeren Mayhew Capital Advisors’ M&A advisors.