Leverage in M&A Deals: The Importance of Multiple Buyers

In the competitive landscape of mergers and acquisitions (M&A), having multiple interested buyers is key for securing the best deal as a selling founder. There is a well-known industry saying, highlighted by Craig Dickens of Merit, that says, "If you only have one buyer, you have no buyers." This underscores a critical strategy: engaging with a single buyer limits negotiating power and makes sellers vulnerable to less favorable deal terms.

Risks of a Single Buyer Approach

If sellers and their advisors negotiate with only one buyer, it reduces their power to bargain. This can lead to the buyer dictating terms, possibly benefiting from any problems in the seller's business. Without competition, the buyer isn't in a rush to offer good terms or finalize the deal swiftly.

Advantages of Engaging Multiple Buyers

It's vital to create a competitive bidding setting. When there are many interested parties, buyers are eager to act quickly and enhance their offers. This gives sellers the leverage to work out better terms and protect their interests for selling. This approach not only helps you get a better deal but it also protects against the risks of a single buyer possibly changing or retracting their original offer.

Strategic Preparation for a Successful Sale

Sellers need to be well-prepared for M&A. Having many potential buyers, even if starting talks with one under good terms, prepares for market changes. This makes the business more attractive and ready for due diligence and other sale steps.