How to handle inbound offers from buyers

What should you do if a buyer approaches you about selling your business? Here’s my advice.

What if a buyer approaches you about selling your business?

How should you react? What should you do? What’s the best way to protect yourself? We’ll go over all of those things today.

But first, let’s talk about inbound interest from buyers.

This is increasingly relevant because founders are getting an increasing number of emails from buyers who say they want to buy their business.

Let’s break down emails from buyers in two categories:

Most of them are from private equity firms that may or may not be interested in YOUR specific business, even though they claim to be. 

I got one of these in my inbox last week. Here’s what it said:

Subject line: Offer to purchase They Got Acquired

We have a private equity firm in our network who is very interested in acquiring They Got Acquired. Given their mandate, this opportunity is an excellent match.

Would you be open to discuss this opportunity?

So the truth is, they really don’t know much about my business at all, so how would they know it’s an excellent match?

The strategy a lot of PE firms are taking right now is to reach out to as many business owners as possible saying they want to buy the business – and then just seeing who responds.

Often this outreach is done by someone who’s only vaguely familiar with the types of companies the firm is interested in. Their job is to send so many emails that they get a few bites.

If you bite, they will ask for some basic information about your business, including how much revenue and EBITDA you’re bringing in. 

It’s only at that point that they can truly say whether they’re interested in acquiring your business. And for most companies, what they often end up saying is, whoops, you’re not a fit after all. 

Which can be really disappointing to founders who thought it was legit outreach. Truthfully, these ARE legit firms, but they’re basically phishing for information, so their interest isn’t solid.

One negative consequence of the onslaught of these outreach emails is that it’s easy to overlook inbound interest from a company that’s truly keen on buying YOUR business.

This is the second category of outreach, when you get an email or a LinkedIn direct message from a buyer who has actually looked at your specific business and sees a real path for acquiring it.

When you get real, strong inbound interest like this, it’s a great opportunity. This is what tends to lead to strategic deals that have higher-than-typical sale multiples, when a good-fit buyer approaches a seller directly.

Now, everyone wants a strategic buyer, of course. But in reality, most of the strategic deals – at least ones where the buyer pays really well for the business, which is the reason founders want these deals to begin with — most of them happen when the buyer approaches the seller, NOT the other way around. 

Let me say that again: They happen when the buyer approaches the seller.

So you’re in a great position if a strategic buyer comes to you. They already see the potential for an acquisition, and they have the appetite for it… the ball is in your court, which gives you lots of leverage.

So how do you tell these two types of outreach emails apart?

The biggie is to look for clues that the buyer has done their research, and they know something about your business. 

If the email feels super generic, you’re probably one of thousands of companies who got that same email.

Now, what should you do if you get inbound interest?

Your response should depend on two things: which kind of email you’re getting, and whether you’re at all interested in selling.

Let’s talk about your options for the more spammy kind of email.

First, you can ignore it. Especially if you’re not looking to sell right now. These conversations can be distracting and take energy away from growing your business.

If you do ignore it, save the email, add it to an ongoing list – so you or your broker can circle back with them when you are ready to sell.

You could also take the call as a way to learn, or to create or strengthen that relationship. But again, this might not be a good use of your time.

If you believe the buyer is truly interested in your business, and you’re not the victim of a spammy outreach campaign, you have a few options:

If you’re certain you do NOT want to sell the business – You could decline the invite. But leave the door open for future conversations.

One founder I talked with recently said he and his co-founder got so many inbound emails and had so many calls because of them, that it became a huge distraction, and they ended up deciding to ignore them for a year so they could build the business with focus. After that year, they would revisit it. 

Alternatively, you could TAKE the call to establish the relationship and learn about that firm, even if you have no intention to sell. 

Don’t reveal too much about your business at this point, since you want to share information strategically when you’re ready. Use that first call to learn more about what THEY’re looking for.

And now, here’s the best-case scenario – what if the buyer seems legit AND you ARE interested? What if you got super excited seeing the note come in and couldn’t sleep that night because you were thinking about it?

Go ahead and take a call with that firm to learn more about their intentions and the opportunity. 

But again, don’t give away too much about your business. Ask a lot of questions, and keep your details close to the vest.

If the buyer still seems serious after that call, here’s where you have the chance to get serious, too. Are you interested in pursuing this opportunity?

If the answer is yes – here’s where some founders misstep.

Rather than selling to the first buyer who comes your way, you are probably best off at this point running a full process. 

What do I mean by, a full process? That’s M&A speak for bringing on an advisor, figuring out how to position the business, bringing the company to market, and attracting multiple buyers.

You may very well end up selling to the initial buyer who approached you, but if you have more buyers in the mix, that will give you significant leverage, which can drive up the sale price. 

One of the best ways to improve your deal is by having multiple firms who want your business.

Now, in some situations, it does make sense to sell to that one buyer – we’ve seen this happen with a number of companies we’ve covered, where the strategic fit is so strong that they make an offer that is unlikely to be beat by other buyers. 

Maybe that offer is financially life-changing, or maybe they’re truly your dream partner.

But this is the point where you should pause and ask: Should I move forward with this one buyer? Or should I run a full process?

Simply knowing that you should take a beat here and consider this, gives you an advantage. 

We’ve written a number of stories about founders who got an inbound offer and were so swept away that they didn’t realize they should run a full process. So they sold to that one buyer. And they might have gotten a good deal out of it, but they probably would have gotten a BETTER deal if they’d attracted more offers.

This is what buyers are hoping you do, by the way, and it’s why they send so many spammy emails. They hope that if they’re the FIRST offer, you won’t realize you should shop the business around, you won’t get an advisor to represent you, and you’ll sell to them without running a full process.

The other thing you can do when you get an inbound offer you’d like to explore, is ask us for help! We can connect you with an advisor who can make sure you get the deal you want and deserve. Or, another options is, I do some hourly consulting to support founders in these situations as well.

Another question that comes up here is, do I need an advisor if I already have a buyer?

That depends.

Sometimes founders do choose to work with an advisor even when they don’t want to run a full process. Because even if you don’t need help attracting more buyers, you would probably benefit from some form of support to help you negotiate terms, avoid red flags and missteps, and move the process along — so you’re not going through it on your own. The bigger your business, the more true this becomes, because the more you stand to lose.

Other founders who have an interested buyer choose not to work with an advisor, and instead, they lean on a lawyer. 

Some lawyers focus strictly on legal agreements, but others will serve as a sort of advocate for you throughout the process, filling part of the role an advisor typically plays. If you do this, you really want a lawyer who has experience with M&A, and that’s likely not the same lawyer you use for other parts of your business.

So if you take anything from this episode, let it be this: If you get an inbound offer, don’t jump at it immediately. 

Instead, use it as motivation to think about whether you want to sell the business. And if you DO want to sell, consider running a full process, and getting the right people to support you, so you ultimately end up with a deal you’re really happy with.

That’s enough for today. Thanks for listening, and I’ll see you next time.