Received an Unsolicited Acquisition Offer? How to Evaluate the Buyer, the Price and Your Next Move

An unsolicited acquisition offer arrives on the buyer’s timetable. The buyer has decided that your business may serve its objectives, identified someone to contact and chosen how to frame the conversation. You may still be deciding whether selling belongs on the agenda at all.

That difference in preparation matters. A buyer can move quickly from an introductory call to requests for financial information, a discussion of price and a proposed period of exclusivity. Each step can seem reasonable on its own. Together, they can draw an owner into a sale process before the owner has established what would make a sale worthwhile.

For a privately held middle-market business, the first task is to develop an independent basis for the decision: what the company is worth to its owners, why this buyer wants it and what terms would justify giving up ownership. The buyer’s interest creates an opportunity to investigate those questions. It does not answer them.

Find out why the buyer approached you

An acquisition inquiry provides more useful information when the owner understands the reason behind it. A buyer seeking entry into a geographic market may evaluate the company differently from one interested in its customer relationships, technical capabilities or management team. A private equity firm considering a new platform investment may have different requirements from a portfolio company pursuing an add-on acquisition.

Ask what specifically attracted the buyer to the business, how an acquisition would fit its plans and why it is pursuing the opportunity now. The answers help distinguish a targeted approach from broad prospecting. They also reveal assumptions that could matter later. A buyer attracted by the management team may expect key executives to remain. One seeking operating efficiencies may anticipate changes that conflict with the owner’s expectations for employees or facilities.

Strategic interest can help explain potential value, but it should not be mistaken for a commitment to pay for all the benefits the buyer expects to achieve. The owner still needs a defensible view of the company’s standalone prospects and a considered approach to negotiating any additional value.

The identity of the actual acquirer also matters. Establish whether the person making contact represents a corporate buyer, an investment fund, a portfolio company or an investor that must assemble capital for each transaction. If an intermediary initiated the conversation, clarify whom it represents and whether that party has authorized the approach.

Develop your position before discussing your price

An owner’s first valuation reference is sometimes the number mentioned by the buyer. Once introduced, that number can shape the entire conversation—even if it rests on incomplete information or assumptions the seller would not accept.

Before responding with a price expectation, consider the alternative to selling. What cash distributions could continued ownership provide? What investment does the business need? How dependent is it on the owner? What risks would the owner retain by waiting, and what opportunities would be surrendered by selling now?

These questions help distinguish an attractive offer from a merely large number. They also prevent personal liquidity goals from becoming the sole basis for pricing the company. The amount an owner needs for retirement and the value a buyer places on the business are separate calculations.

Co-owners should address their differences at this stage. One shareholder may want a complete exit, while another would prefer to reinvest and remain involved. Agreement on a headline price will not resolve those competing objectives if the proposal requires everyone to accept the same structure.

An initial financial assessment can provide context without launching a sale process. Its purpose is to establish a reasoned negotiating position and identify what additional information would change the owners’ decision.

Ask what must remain true for the buyer to pay its proposed price

A preliminary valuation is supported by assumptions. Understanding those assumptions is often more useful than debating the number in isolation.

If the proposal applies a multiple to EBITDA, determine which earnings period the buyer used, which adjustments it accepted and whether it assumed growth that has yet to occur. Ask what level of working capital must remain in the business and whether the quoted figure represents enterprise value or equity value. Debt, cash, transaction expenses and other negotiated adjustments can materially affect shareholder proceeds.

A useful question is: What would cause the buyer to revise its valuation?

The answer may identify customer retention, management continuity, financing availability or confirmation of earnings as central dependencies. Those issues deserve attention before the owner invests heavily in diligence. If the buyer’s valuation assumes that the founder will remain for several years, for example, that expectation should be discussed while the commercial terms are still taking shape.

Separating assumptions from unresolved questions also improves later negotiations. A change arising from newly discovered information is different from a disagreement over something the parties never defined. Documenting the basis of the proposal helps both sides identify which situation they face.

Separate the price from the risks you will continue to carry

Selling a business does not necessarily end the owner’s financial exposure to it. Seller financing, earnouts and rollover equity can leave a substantial portion of the outcome dependent on what happens after closing.

Consider a simplified hypothetical comparison. One proposal offers $20 million, with $14 million payable at closing and up to $6 million contingent on future performance. Another offers $18 million payable entirely at closing. Assuming identical treatment of debt, cash and working capital, and excluding taxes, fees and other adjustments, the second provides $4 million more immediate liquidity. The first offers a higher maximum outcome, but achieving it requires further analysis.

For an earnout, the central issue is whether the seller can reasonably assess and influence the conditions governing payment. Who controls pricing, staffing and investment? How will shared expenses be allocated? Could integration decisions make the target harder to achieve? Confidence in the business’s prospects does not resolve weaknesses in the payment mechanism.

Rollover equity calls for an investment decision. The seller needs to understand the entity in which it will hold ownership, the capital structure, governance rights, potential dilution and circumstances under which liquidity might become available. A stated rollover value does not establish what that interest will eventually realize.

A seller note introduces credit exposure. Its repayment schedule matters, but so do security, priority relative to other lenders and restrictions on payment.

Comparing proposals therefore requires more than adding their components. Owners should distinguish cash available at closing, contractual payments due later, contingent payments and continuing investments. Each serves a different purpose and carries different risks.

Let the buyer’s progress justify deeper disclosure

Information requests can advance faster than the commercial discussion. A buyer may ask for customer-level revenue, detailed margins and management meetings while offering little clarity about valuation or financing. The seller then bears increasing disclosure costs without knowing whether a workable transaction is taking shape.

A useful discipline is to connect each stage of disclosure to a question the parties need to resolve. Summary financial information may help establish an initial valuation range. More detailed analysis may test earnings quality. Customer identities and commercially sensitive information require a stronger justification and appropriate safeguards.

Before expanding access, ask what the requested information will establish and how the answer will affect the proposal. This keeps diligence connected to a decision and helps identify requests that are premature.

When the buyer is a competitor, counsel should help determine whether aggregated information, redactions, restricted access or a clean team is appropriate. A confidentiality agreement alone does not resolve every concern associated with sharing competitively sensitive information. The FTC’s guidance specifically addresses controls over such disclosures during pre-merger negotiations and diligence.

The same principle applies to management access. Meetings with key executives should have an agreed purpose, appropriate preparation and a place in the transaction timetable. Protecting management attention helps preserve the business’s performance while the owners evaluate the opportunity.

Choose a process that resolves your main uncertainty

Owners often frame the next decision as whether to negotiate with the buyer or run an auction. There are several intermediate choices, and the appropriate one depends on what the owner still needs to learn.