It’s good to be liked. Especially when you’re liked because of the success of your business. But all flattery aside, if you’re sought after by a competitor looking to buy your business, what should you do? The short answer is: proceed with caution.
First, Take a Gut Check
Whether you could sense an offer coming or were totally caught by surprise, you should always do a gut check first to see if you’re even interested in considering the proposition.
A deal may seem too good to pass up, but if you had other plans for your business, you should weigh how this deal fits into those plans before investing time and energy into a potential acquisition. After evaluating your own goals, you may decide that it’s a hard “no” on the offer, or perhaps you could be persuaded by a good deal.
Call Your Lawyer
Even if a business is just expressing interest, you should consult your business attorney right away to help you evaluate the legitimacy of the offer. A few red flags to look out for is if you are this business’ first acquisition or if the acquiring company doesn’t have its own M&A team. It’s important to remain cautious about any potential deals in case they are just fishing for insider intel.
Make Some Demands
As the company being acquired, you don’t have to simply roll over and accept the offer at face value. You are in a position to negotiate and make some demands. Consult with your attorney on the best strategy for your situation, but a few demands to consider are:
- Shortening the diligence period to 60 days without extension
- Requesting a break-up fee, which must be paid if the buyer does not follow through on their offer
- Asking for a draft of the purchase agreement early in the process rather than relying on whatever details are outlined in the Letter of Intent (LOI). This way if you do not agree to the terms of the purchase agreement, you will have time to negotiate and you will not have revealed too much in diligence.
Selling your business to a competitor may provide immediate financial reward, but you want to make sure it is a legitimate offer and not one veiled in an attempt to steal your business secrets.
The best way to minimize your risks and protect your assets is to consult closely with your business attorney. If you have any questions about mergers and acquisitions in Florida, contact our commercial law team at Silverberg|Brito, PLLC.