When ‘What’s it going to take?’ is a flag on the play

Scott Bushkie

Guest Columnist

April 7, 2025

“What will it take for you to not sign with an M & A advisor? Give us a number.”

That’s what one of our clients heard when she informed a potential buyer she was working with Cornerstone on the sale of her business.

Does that sound alarm bells for you?

It should.

Buyers often target business owners before they engage an investment bank or M&A advisor, as they know they can secure a better deal through direct negotiation.

Uptick in inquiries

If you own a business of a certain size, you’ve probably gotten quite a few letters or phone calls like this.

Unsolicited offers come from private equity firms, family offices and strategic buyers who are actively seeking to acquire companies.

Many owners are reporting an uptick in these offers.

Why?

First, there’s an abundance of capital in the market, with private equity firms and other investors actively seeking to deploy their funds.

They need acquisitions to meet their promises to investors.

Second, in a tight labor market, companies tend to shift from organic growth to growth through acquisition.

Instead of hiring new team members and building new divisions from the ground up – which is difficult when unemployment is low – they look to buy going operations instead.

Responding to unsolicited offers

Be careful.

Though these offers may seem flattering and attractive at first glance, they can mask a carefully orchestrated strategy to acquire businesses at below-market values.

We’re not saying every potential buyer is out to get you.

But the truth is that these are professionals with a responsibility – and that responsibility is to generate returns for their organizations.

The best ones engage in respectful, fair negotiations.

But there are plenty of buyers who are well-trained and well-practiced in the art of strategic deception.

Their tactics may include making exciting but unrealistic initial offers, false promises of a quick close, pushing for exclusive negotiations, extracting more working capital than necessary and shifting transaction risks to the seller.

What should you do when an attractive offer crosses your desk?

Consider these steps to ensure you make the best decision for your future.

1. Assemble a team of advisors, including an M&A advisor, to guide you through the process. Having a trusted team in place allows you to respond quickly and effectively, putting you in the best position to capitalize on the opportunity while protecting your interests.
2. Obtain a professional fair-market analysis to understand what your business is worth. This will provide you with a benchmark to evaluate any offers and ensure you’re not leaving money on the table.
3. Consider whether a sale aligns with your goals, personal and professional. Take the time to reflect on your priorities and what you hope to achieve through a sale. This will help you determine if now is the right time to sell and what type of buyer would be the best fit.
4. Create a competitive bidding environment to maximize value and find the best fit for your company. By having your M&A advisory firm run a structured sale process, you can keep the unsolicited offer in play while bringing other interested parties to the table. Having multiple buyers will give you more bargaining power and help you secure favorable terms.
5. Vet all potential buyers to ensure they have the wherewithal to complete the deal and a solid track record of keeping their commitments.
6. Safeguard your information by requiring potential buyers to sign non-disclosure agreements (NDAs) before sharing any confidential data. Your M&A advisor can help you determine what kind of information to release at each stage in the process.
7. Be careful what you sign. Don’t sign a letter of intent (LOI) without M&A representation. An LOI will typically have an “exclusivity clause,” which gives the buyer significant leverage as you now can’t bring other buyers to the table and you have basically agreed to the financial terms of the deal. After an LOI is signed, the price typically only goes down or, at best, stays the same without proper representation by an M&A firm and an M&A advisor.
8. Choose the right successor for you. Consider not just the financial aspects of the deal, but also cultural fit and vision. With multiple buyers at the table, you’ll have the opportunity to select the one that best aligns with your values and goals.
9. Don’t play the club pro. Imagine you’re the most fit, talented athlete in the world, but you’ve never played golf. If you were to compete against a club pro who has played their course hundreds of times, who’s going to win? The club pro, every single time. This analogy perfectly illustrates the dynamics at play when business owners negotiate directly with sophisticated buyers.