Receiving an unsolicited approach for your business can be both exciting and daunting. While it might seem like you’ve avoided the need for an M&A or corporate finance (CF) adviser, the reality is that this is often when expert guidance becomes most critical. A good adviser does much more than find buyers—they help you navigate the complexities of a potential deal to ensure you get the best outcome.
If you’ve received an unsolicited approach, here are the key steps you should consider:
1- Prepare a Briefing Pack or Information Memorandum
Treat the unsolicited approach as an opportunity to position your business in the best possible light. Proactively prepare an information pack that presents your business as a strong investment opportunity.
- Accuracy and Timing: Ensure all information is accurate and ready to share promptly. Delays or inaccuracies can weaken your position.
- Showcase Potential: Highlight profitability adjustments, such as excess directors’ pay or investments that will drive future growth.
- Forecast Growth: Don’t just focus on past performance. Present financial forecasts that show your business’s potential, both as a standalone entity and as part of an acquirer.
- Create Leverage: Even if there’s no competing bidder, signal that you’re prepared to go to market if the offer isn’t strong enough.
2. Understand Your Value and Buyer Universe
Knowing your worth is essential to making informed decisions.
- Comparable Deals: Analyze past transactions in your sector to gauge your potential value, but note that interpreting these deals often requires an experienced M&A adviser.
- Explore Competition: Identify other potential buyers who might value your business more.
- Valuation Insights: Obtain a valuation from an experienced CF adviser to understand what you should expect.
- Create Competitive Tension: If the timing is right, consider going to market to generate multiple offers and maximize value.
3. Learn How Deals Work and Maximize Value
Unsolicited offers often come with assumptions or misunderstandings that can significantly impact the deal.
- Clarify the Offer: Ensure you understand terms like cash-free/debt-free, how working capital is likely to be treated and how to negotiate profitability adjustments. Misunderstandings here can cause major issues later in the deal.
- Enhance the Offer: Look for opportunities to negotiate better terms, from add-backs to profitability or property treatment. Is there an earn-out or retained shares – and are the terms around these adequately structured?
4. Understand How Much Is Enough
Before accepting an offer, ensure it aligns with your personal and financial goals.
- Financial Planning: Work with a wealth manager to review your family’s cash flow and determine whether the deal is sufficient to fund your future.
- Life Balance: If the offer meets your needs, consider whether continuing to run the business is worth the opportunity cost of time with family or pursuing other passions.
5. Be Ready to Negotiate
Negotiating is a critical step, and an experienced adviser can strengthen your position.
- Maintain Relationships: Let your adviser take a firm stance on your behalf while preserving your relationship with the buyer.
- Understand Leverage: If the buyer wants to avoid a competitive process, use this to negotiate better terms.
- Plan for Scenarios: If the buyer threatens to walk away, ensure you’ve assessed your business’s market appetite and true value to avoid making decisions blindfolded.
6. Prepare for the Delivery Stage
The final stage of the deal can be the most complex and time-consuming, but thorough preparation is key to success.
- Legal Expertise: Engage experienced corporate lawyers who specialise in M&A transactions.
- Due Diligence: Have your data room ready to ensure a smooth process.
- Tax Optimization: Work with a tax adviser to minimise costs and secure any necessary clearances.
- Consents and Approvals: Address any required consents, such as release of bank charges or change-of-control approvals.
- Working Capital Negotiations: Negotiate the best working capital position on a debt-free, cash-free basis to maximise value.
The delivery stage can take months and is often an emotional process. A skilled adviser can act as a buffer, absorbing stress and ensuring the deal stays on track while protecting the value you’ve built.
Conclusion
Receiving an unsolicited offer is important, but it requires strategic planning to ensure the best outcome. With the right guidance, you can move from being a passive recipient of an approach to proactively shaping the deal to your advantage.
At Logros Advisory Partners, we specialise in helping business owners like you navigate these opportunities confidently and professionally.
