Unsolicited Offers: Protecting Your Business and Maximizing Value

Unsolicited offers to buy your business can be flattering but present significant risks if handled improperly. To protect your business’s value and ensure the best outcomes, it’s critical to approach these offers strategically. This article outlines essential steps to safeguard your business, optimize its valuation, and make informed decisions when unsolicited offers come your way.

Unsolicited acquisition offers often arrive unexpectedly, with buyers expressing interest in purchasing your business. These offers might come from strategic buyers, private equity firms, or family offices looking for opportunities. While these offers can signal your company’s success, engaging without preparation risks undervaluation, loss of proprietary information, and unnecessary distractions from running your business.

Handling unsolicited offers effectively requires a balance of confidentiality, valuation optimization, and strategic planning. By professionalizing your financials and seeking expert guidance, you can maximize value while maintaining control over the process.

Key Takeaways for Handling Unsolicited Offers

Secure Confidentiality Agreements

Always have potential buyers sign an NDA (Non-Disclosure Agreement) and, where necessary, a non-circumvention agreement. These documents protect your business’s sensitive information and prevent competitors from misusing proprietary insights or poaching talent.

Control the Flow of Information

Before sharing financial or operational details, request an “Indication of Interest” (IOI) to gauge the buyer’s seriousness and proposed valuation range. Only disclose additional details after confirming their commitment.

Professionalize Your Financials

Adjust your financial statements for non-recurring expenses, market-rate salaries, and other factors that impact EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Clear and accurate financials are critical to defending your valuation.

Understand Market Dynamics

Monitor market conditions, including multiples and financing availability. Even if deal activity is increasing, consult with a transaction advisor to determine whether selling now is optimal or if waiting could yield better results.

Avoid Distraction

Managing unsolicited offers without preparation can divert focus from daily operations, potentially harming your business and its valuation. Delegate the process to advisors while you maintain operational excellence.

Unsolicited offers represent both an opportunity and a risk. While they affirm your business’s value, they also require careful navigation to ensure maximum benefit. By protecting your confidentiality, optimizing your financials, and seeking professional advice, you can control the process and achieve a favorable outcome. For tailored guidance and resources, consult experienced transaction advisors or visit Candor Advisors’ insights section.