Guide
Someone offered to buy my business: do I need a broker?
Updated
The offer arrived without anyone marketing your business. That single fact removes most of what both intermediary models are paid to do.
What the approach does and does not tell you
An approach tells you one buyer wants the business. It tells you nothing about price, because a single bid has no reference point, and buyers who approach quietly are usually hoping to avoid one. The whole question is therefore not who should sell my business but do I want to find out what else is out there. Answer that first, because everything else follows from it.
If you do not want the market tested
- Get an independent valuation. Not from the buyer, and not from a firm that would like the sale mandate. You are buying a reference point, not a marketing document.
- Appoint a corporate solicitor who does share sales. Heads of terms, exclusivity, the sale and purchase agreement, the disclosure letter and the warranties are specialist work, and the commercial firm that does your contracts may not do it often.
- Take tax advice before the structure is agreed. Share sale or asset sale, deferred consideration, earn-out and rolled equity all change what you keep, and they are almost impossible to unwind once heads of terms are signed.
- Consider a fixed-fee deal manager. Some corporate finance firms will project manage a single-buyer negotiation for a fixed fee rather than a percentage. On a deal that found itself, that is usually the cheapest competent help available.
If you do want the market tested
Then you are running a process, and the named buyer becomes one participant in it rather than the counterparty. That is an M&A advisor's job, and the approach is useful leverage: a credible existing bid is the easiest way to make other buyers move quickly. Two warnings. First, do not sign exclusivity before you have decided, because exclusivity is precisely the clause that stops you testing the market. Second, tell the advisor about the approach on day one, since fee scales and tail clauses often treat a pre-existing named party differently.
Whatever you decide, do not sign a non-disclosure agreement or heads of terms drafted by the buyer without your own solicitor reading them. Exclusivity, standstill and non-solicitation clauses in those documents shape everything that follows. Run the checker if you want the full branch for your situation.