By Stuart M. Brown, Partner and Co-Chair, Commercial Transactions
Envision working diligently in your business one day when the telephone rings. On the other end is a pleasant-sounding individual who compliments you on your business success, with an alarming amount of granular knowledge about you and your Company, and quickly expresses interest in acquiring your business. Immediately, the bubble over your head reads “that new fill-in-the-blank sports car or yacht or vacation home is finally mine!” Not so fast!
Before embarking on a journey that may or may not be worthwhile, consider your options: (i) pursue it on your own, (ii) decline the offer, or (iii) defer the conversation until you speak with your trusted advisors in order to make an informed decision. As the saying goes, you begin the process of selling your business on the day you decide to start your business. You will be best served by addressing the offer with a well thought out plan, i.e., are you emotionally and financially ready to consider selling your Company? If not, don’t waste time. If you are, consider the next step – who will help you evaluate the offer and how do you proceed?
Surrounding yourself with the right professionals to form a deal team who will serve your interests well by minimizing wasted time and maximizing value is essential. Your deal team should consist of your M&A attorney, an accountant with deal experience and an intermediary. You ask, I received an unsolicited offer so why would I need an intermediary? To answer a question with a question, do you know the market value of your Company? Do you know if the proposed terms are reasonable given the current economic climate? Can you successfully negotiate the business terms of the transaction while running your Company (in effect, two full time jobs)?
To properly evaluate an unsolicited offer, you should find out what the “market” is willing to offer to you for your Company. To do so, it would be most efficient and expedient to engage an intermediary to provide the data. The intermediary can be engaged as a consultant or in the traditional sense as an exclusive transaction advisor. Bottom line: while you know your business and possibly some potential suitors, the only way to make an informed decision is after a thorough and careful review of the industry data.
The M&A markets are competitive and tricky. An unsolicited offer provides certain advantages to the suitor such as a non-competitive landscape and a potentially unsophisticated seller. In this case, “seller beware” is appropriate. While it is clearly an ego-boosting experience to receive an unsolicited offer, the sale of your Company may be the single most important business transaction of your life. Approach it with care and a healthy amount of skepticism.
That said, unsolicited offers are not necessarily bad offers; however, they can present traps for the unindoctrinated and those who believe that they can sell their business entirely on their own. After all, how hard can it be? Turns out, it’s pretty hard! Here’s the takeaway — work with experienced advisors who know the M&A landscape as well as you know your business. Good luck!