Be a Better Buyer: Pre LOI - Don't Distract or Mislead
When buyers approach founders with an interest in acquiring their business, the way they present themselves can make or break the deal. Founders have spent years, if not decades, building their companies, and they are not simply waiting for an unsolicited offer to appear. The key to a successful acquisition starts with transparency, respect for the founder’s time, and clear communication.
How Buyers Can Approach Founders the Right Way: Building Trust in M&A
In this article, we’ll cover the key elements that make buyers more attractive to sellers, highlighting the best practices in outreach, valuation discussions, confidentiality agreements, and deal structuring.
First Impressions Matter: Be Transparent About Who You Are
When approaching a founder, buyers need to introduce themselves in a straightforward and honest manner. Many founders do not understand the nuances between private equity firms, venture capital firms, and independent sponsors. Therefore, buyers should provide clear details on:
• Whether they are a private equity firm, a strategic buyer, or an independent sponsor.
• Their experience in acquiring businesses (how many deals they’ve closed, fund size, and track record).
• Their process, including timelines, financial expectations, and deal structure preferences.
A vague or overly salesy approach can quickly turn founders off. Instead, specificity and transparency in initial outreach build trust and encourage engagement.
Respect the Founder’s Time by Asking for the Right Information
Founders are busy running their businesses and do not have time to go through excessive due diligence just to receive an initial offer. Buyers should avoid making broad, non-specific requests that require too much effort from the seller upfront. Instead, they should:
• Request only key financial information necessary to assess valuation.
• Avoid asking for details about employees, customers, or sensitive operational data at the early stages.
• Provide a clear and concise request list so founders know exactly what’s needed.
By streamlining information requests, buyers demonstrate professionalism and increase the chances of getting a positive response.
Always Use an NDA and Honor Confidentiality
Confidentiality is critical in M&A transactions. Founders are often worried about leaks that could affect employees, customers, or competitors. Buyers should:
• Always put a Non-Disclosure Agreement (NDA) in place before reviewing sensitive information.
• Refrain from using insider knowledge for competitive advantage.
• Consider including non-circumvention clauses, which prevent buyers from poaching employees or reaching out to customers without the seller’s consent.
Give a Clear Valuation Approach
Sellers are highly sensitive to deal structure and how buyers value their business. Instead of keeping things vague, buyers should:
• Clearly explain whether they value the business based on EBITDA multiples, revenue multiples, or discounted cash flow analysis.
• Provide guidance on how they typically structure deals, including cash at closing, earnouts, and stock components.
• Set expectations early on how they intend to finance the transaction.
Be Specific in Your Offer and Explain the Process
Many sellers get frustrated with buyers who provide broad or non-committal offers. Instead of issuing a general statement of interest, buyers should:
• Provide a concrete Indication of Interest (IOI) that includes valuation, terms, and conditions.
• Clearly outline the Letter of Intent (LOI) process and key deal points.
• Offer insights on what the due diligence process will look like and how long it will take.
Acquiring a business is not just about numbers—it’s about relationships. Buyers who take the time to approach founders with transparency, respect, and professionalism significantly improve their chances of getting to a successful deal. The more a buyer can reduce uncertainty and provide clarity upfront, the more likely they are to win the trust of a seller and move forward in the M&A process.
