Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

January 11, 2016

An Unsolicited Offer – What NOT to Do

By Joseph Eneldas

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It takes planning to successfully sell a business, and one of the most “unplanned” events is an unsolicited offer.

“As a matter of fact, we often experience business owners requiring our services due to an unexpected offer,” says Achim Neumann, President, A Neumann & Associates, LLC, a New Jersey based M&A and business brokerage firm. “The most immediate question for the business owner is, ‘what do I do next?’” But as is the case in an orderly planned transfer, there are also some “basic rules” in dealing with unsolicited offers.

Firstly, there is no reason to rush, regardless of what the investor expresses. “The offer is only good until Friday” or “The buyer is looking at other businesses” are indeed simply pressure tactics to entice the business owner into a hasty, not-well-thought-out decision.  Businesses are usually not sold overnight, and the mere presence of pressure should alert an owner: Slow things down!

Secondly, without a proper business valuation in place, an owner simply cannot move forward. This is an indisputable fact, and a delay for a business valuation will certainly be accepted by any honest investor. It is truly not possible to negotiate a transaction value, deal structure, and owner transition compensation package without a credible business valuation. Therefore, the first order of business needs to be to put an objective, third party, accredited business valuation into place.

“For every hundred buyer inquiries, only two thirds of the buyers qualify,” says Frank Arcoleo, Managing Director Central Pennsylvania and Central New York, “thus, it is very important to make sure that the interested party indeed has the funds to buy, and experience to run, a business.”  Suggesting such a qualification process typically puts the business owner in an awkward spot, but a qualified M&A advisor is in a considerably better position to request such buyer information prior to revealing any confidential information about the business.

Another important part of the pre-qualification process is to execute a non-disclosure agreement. The mere knowledge that a business owner is open to negotiate a sale would cause significant problems for the business if leaked into the marketplace.

An old mantra in the M&A business is the expression “One buyer is NO buyer”: basically, the first buyer is most likely not the one who will ultimately purchase the business.  Thus, once a business valuation has been put into place, there is an opportunity to contact other buyers, again preferably by way of an M&A advisor to maintain confidentiality. Thus, the initial LOI – most likely containing a “no-shop” provision – should under no circumstance be immediately accepted and signed.

In sum, a reasonable, seasoned business investor fully understands the due diligence a business seller needs to go through before accepting an offer, especially if the primary business owner also has a responsibility towards other shareholders. As a result, no seller will agree to sign “on the spot,” and it’s only the unsophisticated buyer, attempting to rush a business owner into a deal, who tries to pressure a seller into an immediate acceptance.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

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James Belanger, Business Owner

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Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer

“I utilized A. Neumann & Associates to assist in an M&A process. They are VERY thorough in using their time-tested process to calculate the value of investment opportunities, a process which provided a very detailed explanation for the value of the potential opportunity. Additionally, they also went above and beyond to extend other services including connecting with others who specialize in your industry and can assist with necessary steps including legal and accounting. Highly recommended!”

Edward Lane , Business Owner

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Achim, who explained the process in detail. He had his colleague Gary come to my office in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using when the time comes for me to sell my business for max value. They gave me great insight into the steps I need to take now to get the best deal in the future. I highly recommend this firm to anybody who wants to sell now or down the road. They not only know their stuff, their actually just real nice guys.”

Robert Kardane, Business Owner
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