The short version
- An offer that arrives out of the blue is a sign your company has value, not proof of what it is worth.
- Get your own valuation before you discuss price.
- Be careful with anyone who says you do not need a broker or an attorney.
- A letter of intent sets the terms that follow, so read it closely before signing.
Why Buyers Reach Out First
Larger competitors, private equity groups and individual buyers all send letters and make calls to owners who have not listed. Some are serious. Others are hoping to buy a good company at a low price before anyone else sees it.
Either way, an approach tells you something useful: your company is the kind buyers want.
Do Not Name a Price Yet
The person calling has probably bought companies before. You may be selling for the first time. If you give a number before you know what the company would bring with several buyers competing, you set the ceiling for the whole deal.
Thank them, ask a few questions and say you will get back to them.
Questions to Ask the Caller
- Who are you buying for, and have you closed deals like this before?
- How would you pay: cash, a bank or SBA loan, or seller financing?
- Would you want me to stay on after closing, and for how long?
- What do you need to see before you can make a written offer?
Watch for "You Do Not Need a Broker"
A buyer who tells you to skip the broker and the attorney is often hoping to keep the deal quiet and the price low. You can still sell to that buyer. Just know what the company is worth first and have your own advisor on your side of the table.
Protect Confidential Information
Do not send tax returns or customer lists until a confidentiality agreement is signed. Even then, share in stages. Staff, customers and suppliers should not learn about the talks from the buyer.
The Letter of Intent
If talks go well, the buyer will send a letter of intent covering price, structure, timing and an exclusive period. Most of it is not binding, but it frames everything after.
Price is only part of it: how much is paid at closing, how much rides on a seller note or an earnout and how long you stay all change what you take home.
Closing steps such as the VEC experience rating transfer and sales tax successor liability should be settled in the purchase agreement that follows.
Compare the Offer to the Market
A broker can tell you what similar companies sell for and whether a wider search would likely bring a better price. If customer concentration is the buyer's main worry, read selling a company with one large customer.
Before you reply to the buyer, request a sale estimate so you know where you stand.