What should you do if you receive unsolicited interest in buying your business?
Receiving an unsolicited approach from a potential buyer is flattering — but it is also the moment when Canadian business owners are most likely to give away value. A buyer who initiates contact has chosen their timing deliberately and understands the process far better than a first-time seller. Nine considerations help you respond from a position of strength.
1. Understand the outreach you are receiving
It is important to understand who is interested in your business and their motivations for wanting to acquire it. This helps you gauge whether the offer is fair and whether you want to engage in further discussions.
2. Know what investors are looking for
Investors typically assess the financial health and potential of your business, the strength of your management team, and the potential for growth. Understanding these factors helps you better position your business and negotiate a fair price.
3. Understand how your company is valued
There are various methods for valuing a business, such as the discounted cash flow method or the comparable company method. Knowing how your company is likely to be valued helps you understand whether the offer you are receiving is fair.
4. Maximize the value of your company
Before entering discussions with potential buyers, consider ways to improve the value of your company — improving financial performance, strengthening your management team, or diversifying your product or service offering.
5. Enter into a transaction with a sole buyer cautiously
A “proprietary deal” is when a specific buyer is given the first chance to purchase a company before it is marketed to other buyers. While this can be tempting, be cautious and consider whether it is the best approach for you — a single-buyer process removes the competitive tension that drives higher valuations.
6. Know who the purchaser is
Understand whether the interested party is a financial investor or a strategic investor. This helps you gauge their motivations and determine whether you want to engage in further discussions.
7. Control the process
When you are the party being approached, it is important to exert control over the process. This may involve seeking the advice of M&A advisors, signing a non-disclosure agreement, and negotiating a fair price — rather than accepting the buyer's process framing.
8. Consider the terms of the deal
In addition to the price, consider other important terms: the structure of the deal (cash, stock, or a combination), any contingencies, and any ongoing obligations or liabilities.
9. Seek professional advice
If you are not familiar with the M&A process, seek the advice of professionals with experience in this area — accounting, legal and deal advisors who can help you navigate the process and negotiate the best possible terms.
What is the key takeaway when approached by an unsolicited buyer?
An unsolicited approach is not an obligation to sell, and it is not a reason to abandon process discipline. The strongest response is to slow down, bring in advisors, protect information with an NDA, understand who the buyer is and how your company is valued, and — where possible — convert a single-buyer approach into a competitive dynamic. Control of the process is what protects your value.
Key facts: responding to unsolicited buyer interest
Nine considerations: understand the outreach, know what investors want, understand your valuation, maximize value first, treat sole-buyer deals cautiously, identify the purchaser type, control the process, weigh all deal terms, seek professional advice
Proprietary deal risk: a single-buyer process removes the competitive tension that drives higher valuations
Buyer types: financial investors vs. strategic acquirers have different motivations
First protective steps: sign an NDA, engage M&A advisors, and control the timeline and information flow
Valuation methods to understand: discounted cash flow and comparable company analysis
About The Shaughnessy Group
Founded in 2017 to help business owners successfully sell or divest their lower-middle-market, privately held companies, and to help clients grow through acquisitions and secure debt funding for those acquisitions. shaughnessy.group.
About the author
Karl Sigerist is a business advisor who helps shareholders, board members, owners, entrepreneurs and executives navigate governance, strategic planning and corporate finance throughout the business life cycle. He has started up eight organizations and led three turnarounds of Canadian and European private and public organizations, growing B2B technology, specialty finance, warranty and creditor insurance companies through mergers, acquisitions, strategic alliances and capital raises. Connect on LinkedIn.
Disclaimer: This article is for general informational purposes only and does not constitute legal, tax or financial advice. Consult qualified advisors regarding your specific circumstances.
