Ask the Advisors: What Should I Do if I’m Approached by a Buyer? How Can I Be Ready?

By Jennifer Mailhes, CPA, Shareholder

Business owners are often unexpectedly approached by a potential buyer, and with deal activity currently at its all-time high, it is something they should certainly be prepared for should the offer arise. While an unsolicited offer may seem like a great opportunity, we certainly urge you to proceed with caution and speak with a trusted business advisor before you begin a conversation, and most importantly, sign any form of agreement.  

If you’re approached, the primary thing to consider is your overall business and personal goals and evaluating whether you feel this provides the opportunity to achieve them. To help gain an understanding of how these align, speak with an M&A advisor to run through an initial process, which includes identifying goals and assessing your value and options, before you get too far down the road with a buyer.  

Secondly, be sure to have reliable financial information readily available, meaning your numbers reflect an adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)  prepared on a consistent basis. This goes a long way in making a business saleable, and it takes time to get there, so it’s best to always be ready. Buyers typically want to see at least three years of financial data and updates regularly when in discussions.  

Lastly, do not under any circumstances sign a letter of intent (LOI) without advice or input from qualified counsel. All too often, we see sellers sign a LOI without seeking advice, leaving little opportunity for negotiation. Although an LOI may be a non-binding agreement, it can help set the deal terms while you have the most leverage.  

Doeren Mayhew works closely with business owners to assist them with navigating the overall M&A process when approached by a buyer. To obtain assistance, contact one of our transaction advisory members today.