Another company wants to buy my company out. I won’t sell it, but is there any harm in asking them to make an offer?

 

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Another company wants to buy my company out. I won’t sell it, but is there any harm in asking them to make an offer?

An investment management company got a hold of me and said they wanted to discuss financials and make a bid to acquire my business. It’s only 3 years old and I’m not going to sell it but am I taking any risks aside from time to discuss with them and find out what they want to offer as a means of tracking growth over the next 2-3 years?

Another company wants to buy my company out. I won’t sell it, but is there any harm in asking them to make an offer?

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32 Replies to “Another company wants to buy my company out. I won’t sell it, but is there any harm in asking them to make an offer?”

  1. a lot of companies make fake offers to get all your company data for free. they’ll ask for all your financials, what kind of customer base, your suppliers, etc. even ask to interview your employees! but then they’ll suddenly turn around and not be interested when it comes time to sign

  2. Won’t they need your financials and processes to be able to make an offer? Would you be willing to give them some visibility into your operations if you weren’t planning on selling anyway?

  3. If you are not in the market to sell, I wouldn’t bother to get the financials and product, vendor and customer catalogs together for them. It could be a trap, so listen to the other sage advice posted here, but also keep the door open to future offers and negotiations – to either sell – or buy THEM.

  4. If you’re 100% certain you won’t sell, don’t do it. It’s going to cost you a lot of time away from other things that can bring your business forward. If you’re actually open to the idea of selling, talk it over. It isn’t as simple as “make an offer though”. This process most certainly will take a few months since there is quite a bit of due diligence involved.

    Of course, a lot of this depends on who they are and who you are. This might not be the case in your situation.

  5. I’m a leery businessman. Even if they sign an NDA, they can still steal your ideas, processes, and try to take your clients. Why? Because you would have to spend money to enforce the NDA.
    What do you know about them? How did they find you? Why would they want your business?

  6. Tell them that it’s awkward because you were about to make them an offer to buy their company.

  7. Totally depends on what you do. If it’s a sand pit company, then why not? You’re not going to tell them anything special about sand pits.

    If it’s a company with IP or some sort of special sauce then yes, of course there’s risk they’re going to wine and dine you and then compete with you.

  8. Alright the people in here largely don’t seem to understand M&A. You don’t open up the important financials until due diligence. You do have to share some basics like revenue and SDE/EBITDA then you can get an offer and a letter of intent. And you just don’t proceed from there. However, why bother wasting their time and your time? If you want to know what your company is worth find the industry multiple of SDE and multiply it out.

  9. Make them sign a NDA that basically excludes them from competing in your region for a period of two-five years if they do not complete the purchase. It’s pretty standard. They can’t recruit any of your employees, will guarantee they lose their right to representation, include penalties for lost revenue, etc.

    You can make pretty airtight NDAs that benefit you.

  10. I’ve had a few inquiries from “Investment” companies about selling my business. I’m always curious about what they would offer, but I always say I’m not interested because I assume they will need to see my company details before they can really make offer. I don’t think you will get an offer until you go pretty far down the road of giving them all the info.

  11. if you are adamant that you aren’t going to sell, why waste anyones time?

    with the right offer most stuff is for sale tho, isn’t it?

  12. Charge $15,000 application fee for a limited view of financials (that you know will hold up in due Diligence ).

    Offer to refund $5,000 from the total sale price if concluded.

    At least it will show if they are serious or not.

  13. No but just don’t be a deuce and lead them on it can help give you perspective etc etc, but don’t let them fly you out on vacation with the wife to pitch you etc there’s levels to it doesn’t hurt to hear the number imo

  14. Hertz did this with luxury car rental tried to buy 3 or 4 of the setup companies and just took info and started own

  15. Hire someone who knows what they are doing in terms of M&A to represent you. If you can’t afford it, hold off until your business is large enough that you can. Don’t go into this alone if you don’t know what you’re doing as they will steal your ideas.

  16. Anything formal could be a distraction if you aren’t really going to sell.

    Instead of asking for an offer, you can ask something like “what kinds of revenue multiples have you used for similar acquisitions” or something general like that. You could get a rough idea of what their offer would be for your company.

    They might say something like 3-5x revenue (would depend on a lot of things), but if they say that consider that the upper limit starting point. If you continued down the path of a formal offer, they would find reasons to whittle away at the first number they offer.

  17. Ask yourself is your business large enough and interesting enough to be bought by VC’s? If it’s a competitor trying to buy you, that may make sense, but if it’s some randome VC, then I’d have to wonder what they’re really about and I wouldn’t let them near my processes, people, customers or financials.

  18. I’ve shown my financials to lots of potential acquirers and it never hurt me.
    Of course filter the data you present, no key clients suppliers etc. And keep it contained, your staff shouldn’t know about this. You aren’t selling you are just learning.
    This said if you aren’t very keen probably don’t waste the time, it can be time consuming (and mentally draining) cause as everyone pointed out you need to be on your toes

  19. I get these almost daily. They say they are local, and they are only trying to “buy and operate one business locally” but I call BS. I am not handing over my financials to anyone I haven’t met in person and already know. So I would say be careful.

  20. Only the risk of disclosing proprietary information. If you would not sell it doesn’t sound worth the risk.

  21. Ask them for $10k escrow that you’ll keep if they don’t buy before gathering that information.

  22. Zillow did this to a small company I worked for. They acted like they wanted to buy us out and flew my boss out. They sucked all our data dry and then kicked the owners to the street.

  23. Harm? Yeah, to them, in wasting an absolute ton of time just to give you a price to satisfy your curiosity.

    They are in the market to purchase. If you aren’t in the market to sell then tell them so and let them spend their time on someone else.

    If you aren’t going to sell, it doesn’t matter what your business is worth. Stop thinking about it. If you can’t stop, then *pay* someone for a valuation.

  24. If you have some business plan where additional investment require then you can work out and provide the some share holding to investor if you feel requirements of fund for further business expansion and take decision

  25. If it sounds too good to be true…

    If you want to dance, hire a transactional lawyer and have the lawyer do most of the heavy lifting. NDA + escrow. Yes, even for an initial meeting. You’d want to see what they’re doing, what they’re thinking, and what they want.

    Bear in mind that if this is a larger player, they’re likely doing the same thing to other similar businesses, either to blot out competition or to get a quicker foothold into a new market.

    Do you have some specific way of doing things that gives you a competitive edge? If so, they’ll want that. And if you blab too much about it, they will clone it. If they can do that, why do they need to pay you?

    Do you have a specific client (or way of dealing with a client) that gives you an edge? Same thing. If they can determine that by talking to you, then they don’t need to pay you.

    If the business is solely due to your sparkling personality, then your business isn’t worth squat without you. You’d be looking at them buying you and give you a job. And I have yet to see that situation work out for anyone long term. They could also just want you out of the way (suppress the competition) in which case, more power to them.

    If you can sell, and the company can live without you, consider what you’d want to walk away.

  26. As others wrote, if they are pumping you for information only, with no intention of buying, then you are giving up your info to them for no reason.

    If they are serious, then I have an issue with making them spin their wheels and put in the time and effort for no reason at all. It’s just not nice to have someone go through the hoops for you for no reason. I know it is their job, but it still takes time and effort that is going to be wasted on their end. Respect people. Respect their time. Respect their effort. And respect your own. It’s not about “being caught” thing or “how will they ever know” thing. It’s an internal character issue.

    I say it is a lose-lose proposition. Be straightforward and direct in all your dealings, that’s what I say. What you are doing is not straightforward and direct. Be a straight shooter.

    Just say “Thank you so much for the interest, I’m not interested right now. But you can call me back in 1 year/2 years/3 years from now and I might be interested.”

    Done.

  27. You could also just ask them basics like:
    What multiples on rev/profit do you typically pay for businesses in this vertical?

    What is the minimum multiple for this vertical?

    Then you can decide if you want to continue or not.

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