A buyer approaches your company.
You do not yet have to decide whether to sell.
The contact itself tells you something: another party sees enough strategic or financial value in the business to initiate a conversation. That creates information and, potentially, optionality. The owner’s first task is to understand what has actually happened before surrendering information, leverage, confidentiality, or strategic alternatives.
Three questions should remain separate:
- Is this a credible buyer?
- Is the proposal economically attractive and executable?
- Do I want to sell, recapitalize, partner, or transact at all?
Those questions may eventually converge. They should not be collapsed at the beginning.
The objective is to learn enough to make the next decision without allowing the buyer’s timetable to become the owner’s strategy.
Start by Identifying What You Actually Received
An expression of interest is not necessarily an offer.
An offer is not necessarily an executable transaction.
And a headline valuation is not necessarily what an owner will receive.
An initial approach may be little more than exploratory outreach. At the other end of the spectrum, it may include a proposed valuation, structure, financing assumptions, diligence requirements, timing, and exclusivity.
Understanding where you are on that spectrum matters.
A buyer saying, “We think your company could be worth $100 million to us,” is very different from a written proposal specifying what is being acquired, how consideration will be paid, what assumptions underlie the price, what diligence remains, and what conditions must be satisfied before closing.
Preliminary transaction documents can contain provisions that are intended to operate differently from the broader transaction proposal. For example, an LOI may describe the proposed acquisition as non-binding while addressing confidentiality, exclusivity, expenses, or other matters separately. Owners should understand the specific language before signing and obtain appropriate legal advice where needed.
The discipline is straightforward:
Understand what is actually being proposed before reacting to what it appears to mean.
Is the Buyer Credible?
A recognizable name is not the same thing as a qualified buyer, and an unfamiliar name is not necessarily an unqualified one.
Before providing substantial information or investing significant management time, understand who is on the other side of the conversation.
A strategic buyer, private equity firm, family office, intermediary, or other acquirer may each approach the company differently. What matters is whether the particular party has the intent, authority, financial capacity, and process discipline to justify deeper engagement.
Buyer Credibility Screen
| Question | What you are trying to understand |
|---|---|
| Who is the actual prospective acquirer? | Identity and transparency |
| Who is contacting you, and what authority do they have? | Whether you are speaking with a decision-maker or intermediary |
| What acquisitions has the buyer completed before? | Experience and execution history |
| Why are they interested in your company? | Strategic or financial rationale |
| Do they appear capable of funding the transaction? | Financial capacity |
| Have they discussed valuation or structure? | Seriousness and preparedness |
| What information are they requesting, and why? | Process maturity and sensitivity |
| What timetable are they proposing? | Expectations and urgency |
| Are they requesting exclusivity early? | Whether alternatives may narrow prematurely |
The table is not a scorecard. It is a way to ask better questions.
The useful decision is not whether the buyer is “good” or “bad.”
It is whether the buyer deserves the next level of access, time, and attention.
Why Does This Buyer Want Your Company?
Before focusing on price, understand why the company may have particular value to this buyer.
The answer might involve geography, customers, technology, talent, distribution, capacity, recurring revenue, an adjacent market, or a consolidation strategy.
Different buyers can therefore assign different values to the same company.
A strategic acquirer may see synergies another buyer cannot capture. A financial buyer may see a platform for future acquisitions. Another buyer may value a capability or market position that would be difficult to build organically.
Understanding motive helps the owner interpret the conversation: what the buyer may be trying to accomplish, what aspects of the business matter most, and where buyer-specific value may exist.
It also helps distinguish genuine strategic interest from an inquiry that is still largely exploratory.
Before Giving Information, Decide What the Buyer Actually Needs
A serious buyer will eventually need information.
That does not mean every serious buyer needs every piece of information immediately.
Disclosure should generally become more detailed as the buyer becomes more qualified, the transaction becomes more specific, appropriate confidentiality arrangements are established, and diligence advances.
This requires particular care when the interested party is a current or potential competitor. The Federal Trade Commission has cautioned that exchanges of competitively sensitive information during pre-merger discussions can raise antitrust concerns. Its guidance describes safeguards that may be appropriate depending on the circumstances, including limiting information to what is reasonably necessary for the diligence stage, aggregation, redaction, third-party advisers, and clean teams.
An NDA can be an important part of protecting information, but its existence does not eliminate the need for judgment about what should be disclosed, to whom, and at what stage.
The commercial question remains:
Why does the buyer need this information now, and is this the appropriate way to provide it?
The more detailed questions—customer information, margins, contracts, employees, concentration data, and sequencing—belong in a separate discussion: What Should You Share With an Interested Buyer—and When?
Do Not Evaluate an Offer on Headline Price Alone
Owners naturally begin with the number.
They should not end there.
Two proposals with the same stated value can produce very different cash proceeds, risk, obligations, and likelihood of closing.
Offer Economics Beyond Price
| Dimension | Question for the owner |
|---|---|
| Headline value | What value is actually being quoted? |
| Cash at closing | How much is received when the transaction closes? |
| Deferred consideration | What amount is paid later? |
| Earnout | What future conditions must be satisfied for payment? |
| Rollover equity | How much value remains invested rather than converted to cash? |
| Financing | Is closing dependent on obtaining financing? |
| Debt and working capital | What adjustments may affect actual proceeds? |
| Execution certainty | What approvals, diligence, or conditions remain? |
| Owner obligations | Is the owner expected to remain involved after closing? |
| Timing | How long and disruptive is the proposed path to closing? |
| Tax sensitivity | How might transaction structure affect after-tax economics? |
Tax treatment is one reason nominal price and owner proceeds are not the same. The IRS recognizes that the sale of a business may involve different categories of assets subject to different tax treatment. The consequences depend on the transaction and the owner’s circumstances and should be evaluated with qualified tax advisers.
The broader principle is commercial:
An offer is a package of value, risk, obligations, and probability—not merely a number.
Decide Whether You Are Evaluating the Buyer or Evaluating a Sale
This distinction is easy to lose once a credible acquirer begins asking serious questions.
An owner may reasonably conclude:
“This is a credible buyer.”
without concluding:
“I should sell my company now.”
The buyer arrived with its own objective. The owner still needs one.
For some owners, that objective may be a full exit. For others, it may be partial liquidity, rollover ownership, recapitalization, succession, a strategic partnership, or continued independence.
The inbound approach should not automatically define the strategic question.
Instead, the owner should consider what outcome would actually be attractive.
Would I want to exit completely?
Would I prefer to retain meaningful ownership?
Do I want to continue running the company?
Is succession becoming more important?
Would outside capital accelerate the next phase of growth?
What matters to me besides price?
And what would have to be true for a transaction to make sense at all?
There is a material difference between reacting to somebody else’s desire to acquire the company and deciding what outcome the owner wants.
The second question should drive the first.
When Should an Owner Bring In an Adviser?
Not every preliminary conversation requires an immediate advisory engagement.
Outside advice becomes more valuable as the conversation begins to affect real choices: when valuation or structure becomes difficult to assess independently, when exclusivity or other commitments are proposed, when sensitive diligence expands, when management distraction increases, or when the issue becomes broader than the original buyer.
Experience also matters. A buyer may have completed dozens of acquisitions. The owner may never have sold a company.
That asymmetry does not make the buyer adversarial. It does mean the parties may enter the discussion with very different levels of transaction experience.
An adviser can help assess that imbalance without assuming the answer must be a broad auction. A focused bilateral negotiation may be appropriate in some circumstances; broader market testing may be appropriate in others.
The facts should determine the process.
One Buyer or a Broader Market Process?
A credible inbound approach often creates the next strategic question: continue with this buyer alone, or examine alternatives?
There is no universal answer.
A bilateral process may offer greater confidentiality, speed, lower disruption, and focused engagement with a particularly logical buyer.
A broader process may provide better price discovery, alternative structures, competitive tension, and a clearer understanding of market depth.
The right choice depends on buyer uniqueness, valuation uncertainty, confidentiality, execution risk, disruption, market depth, and the owner’s priorities.
The early principle is simpler:
Preserve the ability to make that choice before granting exclusivity or otherwise narrowing alternatives.
The fuller analysis belongs in One Buyer or a Market Process?
What Should You Do in the First Few Days?
An unexpected approach does not require an elaborate sale process on day one.
It requires discipline.
| Stage | Owner action | Objective |
|---|---|---|
| Acknowledge | Respond without signaling commitment | Keep a potentially useful dialogue open |
| Identify | Understand the buyer, representative, authority, and background | Determine who is actually approaching you |
| Listen | Learn the buyer’s rationale before volunteering unnecessary detail | Improve the information balance |
| Contain | Keep the internal circle appropriately narrow | Protect confidentiality and limit disruption |
| Protect | Establish appropriate information controls | Avoid premature disclosure |
| Clarify | Ask what the buyer is proposing and what they expect next | Convert vague interest into specifics |
| Assess | Consider seriousness, economics, structure, execution, and alternatives | Decide whether deeper engagement is warranted |
| Advise | Bring in appropriate M&A, legal, tax, or accounting expertise before material commitments | Improve decision quality before options narrow |
| Choose | Continue bilaterally, examine alternatives, defer, or decline | Make a deliberate next decision |
The point is not to treat every buyer with suspicion.
It is to prevent the pace of the buyer’s process from automatically becoming the pace of the owner’s decision-making.
A serious buyer should be able to tolerate serious questions.
The Goal of the First Conversation Is Not to Decide Whether to Sell
A credible acquisition approach may lead to an attractive transaction.
It may reveal strategic value the owner had not fully considered. It may accelerate a succession or liquidity discussion. Or it may lead nowhere.
The owner does not need to know the outcome when the first call arrives.
The initial objective is narrower:
Learn enough to make the next decision without unnecessarily surrendering information, leverage, confidentiality, or strategic alternatives.
That requires keeping three questions distinct:
Is the buyer credible?
Is the proposal attractive and executable?
And independently:
Do I want to transact at all?
Once those questions are separated, the owner can evaluate the opportunity on its merits rather than on the urgency created by the party that initiated it.