Many owners are inundated with offers to acquire their business, particularly if the business is doing north of $3 – $5M in revenue annually. These offers can be tantalizing, especially if they hit an owner during a stressful period, cash crunch, or lull in business.
When strategic acquirers, or private equity (PE) firms, make these unsolicited offers they are hoping to accomplish several things. First, they want to lock you into a period of exclusivity while they assess your financials, team, and operating model. Second, if they are already competing in your market…they could use the information they learn to sharpen their pricing or operations edge, or worse, go after your employees. The third goal with unsolicited outreach is more subtle and what we will talk about today: the buyer wants to meet. Talk. Look you in the eye.
The buyer tsunami
When we take a quality business to market, we see 50, 100, 200+ prospective buyers inquire almost immediately. These inquiries come through many channels, including our site, the business for sale platforms we market on, our buyer email list, social media, and our network of known industry buyers.
Issaquah roofing business we sold this year? 111 buyer NDA’s.
Mercer Island property mgmt business? 130 buyer NDA’s.
Bellingham plumbing business? 90 buyer NDA’s.
Snohomish skydiving business? 231 buyer NDA’s!
You get the idea.
Why are buyers so eager to meet a seller?
Without question, every buyer will want to meet or talk with a seller very early into the process, sometimes before even seeing financials. Why?
Buyers are looking to assess fit of course, but beyond this, they want to stand out in a competitive, M&A auction process.
It is human nature..most people are wired to want to like someone when they meet them. By meeting or talking, a buyer is hoping for “a spark” or connection to be made.
The goal is that this spark will overcome any valuation or negotiation differences, cold hard lender math, legal language in a purchase & sale agreement, and desired transition periods.
The reality is that 98% of these prospective buyers will never consummate a deal. Small and medium business acquisition is an asymmetric market. There are too many buyers chasing a far smaller number of quality businesses.
Given these market dynamics, we do not put prospective buyers in front of a seller until further into the deal process.
Our buyer process
After seeing a “blind” or anonymous summary of a business opportunity, buyers are directed to complete an NDA (non-disclosure agreement) to receive more information about a business.
Once we have verified a buyer’s identity, we release a polished, confidential marketing document that includes the business name, summarized financials, and insight into the operation, team, history, owner role, growth levers, equipment & vehicles, inventory, and more. These confidential marketing documents have several names, including a CBR (confidential business review), CIM (confidential information memorandum), pitchbook, prospectus, or simply “book”.
Releasing this document is the start of a fact-finding and analytical exercise for buyers. When we share this document with a buyer, we ask that they submit initial questions via email. This provides time to research and obtain information from the seller, particularly for detailed questions on the financials or operations. We can of course share detailed financials so they can evaluate the business.
After we respond to a buyer’s initial, emailed questions with supporting data – we Zoom to discuss the business and better understand a buyer’s 1) fit / firm / background and 2) financial capacity. The seller is NOT on these initial buyer Zooms.
At this stage, the back-and-forth communication with a strong buyer can take different directions.
We often trade emails to answer more detailed buyer questions as they further research a business or industry, or perhaps a buyer has looped in a bank, business partner, or investors. We conduct follow-up Zooms and calls as needed.
Seller video – an M&A game changer
As we prepare to take a business to market, we record a conversation with the seller. The idea with this video is to capture many of the core questions that will be top of mind for buyers, including:
- History of the business
- Owner’s role
- Team & key roles
- Growth levers
- Operating model – the weekly flow of the business
Sellers frequently share rich context in these videos, and we encourage buyers to watch the recording before sending initial questions to us.
This seller interview is shared with buyers
We include a link to this seller interview in the confidential marketing document.
To recap the information a buyer has at this stage:
- Confidential marketing document
- Seller interview recording
- Buyer FAQ (often 8+ pages of answers to detailed questions after a buyer has reviewed a marketing doc – buyers see questions asked by other buyers)
- Buyer Financial Summary XLS. This Excel file contains three-years of the P&L and Balance Sheet (annual view) and a monthly view for the most recent 12 months
- Zoom with us, the M&A Advisor or Broker
Offer time, aka time to submit an LOI
At this stage, we work with buyers to submit an LOI (letter of intent) or offer. Yes, this means we ask buyers to submit an LOI before they have met or Zoomed with a seller.
Why do we take this appraoch?
Our rationale is informed by experience and market context across 25+ successful transactions.
Requiring a buyer to prepare and submit an LOI is a forcing mechanism with buyers. Beyond this, it protects a seller’s time and helps us screen the large volume of prospective buyers with the more serious buyers who are ready to move forward in a competitive, lengthy transaction process.
The buyer & seller meet
Depending on the number of LOI’s, we take different approaches on a deal.
In the last year+, nearly every business has received multiple offers. Depending on the number of offers, we facilitate buyer / seller Zooms at this stage.
To be clear, an LOI (offer) has been submitted by a buyer. The LOI has not yet been accepted by a seller.
If there are less than 5 offers and assuming these offers are comparable in valuation and deal structure, we advise a seller to Zoom with each buyer directly. If our assessment of buyer background or fit differs, and it often does, we will eliminate some offers (buyers) at this stage before a seller starts to Zoom with buyers.
If there are 5 or more offers, we eliminate some buyers before seller / buyer Zooms. In situations with 10+ offers, we do not have a seller Zoom with more than 4 or max 5 buyers.
In our experience, the initial seller / buyer Zoom or meeting is rarely groundbreaking. It makes sense when you think about it, right? The seller and buyer walk through their backgrounds and relevant experience. Many individual buyers provide some color on their family life or personal situations too. Given that these are initial meetings, it is unusual to cover substantive details or insight that the buyer has not already received up until this stage.
One interesting observation..
Often, it is the buyers who weed themselves out on these Zooms. We prepare a seller for these initial interactions and from our experience, buyers have done little to prepare themselves. A buyer should be able to succinctly walk through their background, why they want to this business, and how they will get it done. In a competitive situation, they should address how they are different.
Time and again, we see buyers fall flat on some of these core items.
Buyers: Prepare. Be energetic. Remember to close!
For a buyer, this could be one of the most impactful conversations of their life.
That is it for today – more to come in a future post. Please forward or share this content if you find it valuable. As always, thank you for reading!
At Washington Business Brokers we are experts in valuation, optimizing a business for sale, buyer identification and qualification, negotiation, deal structuring, and closing.
We proudly represent businesses with revenue of $2M – $30M across many industries. While most businesses are in the Pacific Northwest, we work with owners across the country. Ideal prospective sellers have 10+ employees and $2M+ in sales.
Washington Business Brokers is the only firm in Washington & Oregon to be recognized nationally for 4 years running by M&A Source and the International Business Brokers Association for verified transactions – including the prestigious Chairman’s Circle award again in 2025.
When the time is right for you, we will be proud to partner and advise on your fair deal.
If you would like to better understand the value of your business or learn more about the process of confidentially selling:
call or text 206.703.3555
email info@wabusinessbrokers.com
or schedule time for an exploratory, free chat
Conversations are always confidential and there is no commitment.
Are you an owner / future seller? Check out our Seller Guide for what to expect
Are you a prospective buyer? Do not miss Straight Talk for Buyers
