How to handle an unsolicited bid?

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1. Know your potential buyer.

You manage your business, so know its strengths and weaknesses as well as its culture. But do you know the characteristics of your potential buyer, his financial capacities, size and scope, track record and shareholder structure? Are they aligned with yours? These are critical pieces of information to evaluate two key questions: do I want to be part of that organization and what is my personal future in the next 5 years working in that company? Two value transfer can occur: an addition of skills or a synergy of activities. Both paths can be meaningful and are not mutually exclusive.

2. Manage confidential information.

Don’t disclose too much information about your business at first. The bidder is undoubtedly in a hurry to receive as much information as possible to evaluate the return on their investment in a consolidated business plan. But your timing is different: Try to learn about their reasons and purpose in choosing you instead of a competitor? Check if there are not screening the market and challenge other targets by using your data.

3. Know your real value.

It is essential to have a realistic and comprehensive perspective of the value of your business. You may have received an offer that looks attractive whilst the actual value of your business may be much higher. A private equity will not value your business as a strategic partner will. You need to defend your value proposition.

4. Have a plan B.

It is the right moment to spend time with your partners investigating different options for structuring the deal. Be proactive and don’t hesitate to come up with your own scenario, a partial divestiture or a joint venture, for instance.

5. Don’t go alone.

Last but not least, take advice from an M&A firm; experts will usefully challenge you on several key topics and protect you about unfair terms and unrealistic earn-out clauses. Having a professional adviser at your side can benefit all parties to structure the deal in the most efficient way.

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