Why buyers go direct
Sooner or later, many founders get the call. A private equity firm, a competitor, or a larger company in the industry would like to talk about acquiring the business. Sometimes there is a number attached. Often it is flattering.
It helps to understand why the call came. A buyer that approaches you directly has chosen the timing, the framing, and the absence of competition. It is not looking for a market. It is hoping to avoid one. That does not make the buyer a bad actor or the offer a bad one. It means the offer was made on the buyer's terms, before anyone else had a chance to bid.
Buyers go direct for understandable reasons. A private equity firm with a platform in your industry may be searching for add-ons and working through a list. A strategic buyer may have identified your business as the fastest way into a market or a capability. A competitor may simply know you well. Each of them would rather negotiate with one founder than compete with other buyers.
An unsolicited offer is information. Treat it that way.
What the offer tells you
Even an early, informal offer tells you useful things.
- Your business is on someone's list. At least one buyer has looked at your market and decided you are worth a conversation. Others with similar strategies may have reached the same view.
- What this buyer values. A strategic buyer that wants your customers, a platform that wants a base to build on, and an add-on buyer filling a gap each value different things. The way the offer is framed often shows which one you are talking to.
- A floor, not a ceiling. The offer is what one buyer would pay with no competition and no preparation on your side. It may be good. It is rarely the best available.
What the offer does not tell you is what the business would fetch in a competitive process, or what you would keep after debt, fees, structure, and tax. Those answers take work the buyer has not done for you, and has no reason to.
The four-quadrant test
The playbook's inbound offer test asks two questions. First, is the offer at least what a competitive process would produce, in both headline and structure? Second, are you ready: are your numbers, add-backs, and story defensible today?
- Ready, and the offer is below what a process would yield: use it as a floor. Thank the buyer, run a process, and invite them into it. Their offer becomes the starting point the rest of the field has to beat.
- Ready, and the offer is at or above: engage, on your terms. This is rare. Negotiate the terms that matter before granting exclusivity, and quietly bring one or two alternatives into the conversation.
- Not ready, and the offer is below: decline, and start preparing. The offer reflects your unreadiness. Fix what a buyer would flag, and revisit the market when the numbers will hold.
- Not ready, and the offer is at or above: slow down. A strong offer to an unprepared founder usually gets re-traded in diligence. Take time to prepare before you respond, and never sign exclusivity unprepared.
To place an offer in the test, translate it first. An offer stated as a total implies a multiple of your adjusted EBITDA, and that multiple can be compared with where you believe the business sits in its range. Then look at how the price would be paid. An inbound offer with a large earn-out or seller note may sit lower in the test than its headline suggests, because a process would compare offers on what the founder keeps.
Most inbound offers land in the left column, below what a process would produce, and are best used as a floor for a real process. Even in the rare right-hand column, readiness decides whether the strong offer survives diligence. Either way, the offer should inform your timetable, not set it.
How to say we will be in touch without losing them
Founders worry that a slow answer will lose the buyer. Usually it does not. A buyer interested enough to call is interested enough to wait a reasonable time, especially if you are clear about what happens next.
A good response is short and honest. Thank them for the interest. Say that you take it seriously and want to respond properly. Say when you will come back to them, and keep to it. Do not share financials, do not name a price, and do not agree to exclusivity, however it is framed. If the buyer asks for information, the answer is that it will come under an NDA, at the right time.
Then use the time. Three things are worth doing before you answer. Rebuild your adjusted EBITDA the way the buyer will, so you know what multiple the offer implies. Model what the offer would leave you after debt, fees, structure, and tax, so you can compare it with the number you need. And list the buyers who might pay more for what you have, so you know whether a process is worth running.
Bring in your own advisors, and decide whether you want a process at all. A buyer that comes back a few weeks later to a founder who is organized, informed, and still interested has not been lost. It has learned that it is not alone.
A quiet process with the offer as the floor
If you are ready, or close to it, the best use of an inbound offer is often as the floor of a quiet, competitive process. That does not have to mean a broad sale that the whole industry hears about. It can mean a carefully chosen group of buyers, approached confidentially, who see a blind teaser with no identifying details and sign an NDA before receiving the CIM. Competitors and customers can be left out entirely.
The original buyer is invited in on the same terms as everyone else. Indications of interest arrive on the same date, so they can be compared. The founder's leverage rises as buyers compete and peaks when several letters of intent are on the table, and that is where the terms that matter are negotiated: price, structure, the working capital peg, escrow, and the founder's role after the sale. Once exclusivity is signed, that leverage does not come back.
Sometimes the original buyer wins. Sometimes it is not close. Either way, the founder knows the answer was tested against the market, rather than accepted because the phone rang first.