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  • Writer's pictureDario Priolo

Navigating an Unsolicited Bid: What to Do if Your Training Business is Targeted



Receiving an unsolicited bid can be an unexpected event, indicating that another party sees value in your business without it being on the market [1][2]. While it often originates from sophisticated entities like Private Equity Groups or strategic buyers, it's essential to understand the implications of such an offer [2].


Before making any decisions, it’s wise to ascertain your company's true value and be wary of tactics that could undervalue your business during negotiations [2]. Engage with professional advisors specializing in mergers and acquisitions to navigate this complex process effectively [2].


Initial Steps to Take After Receiving an Offer

Upon receiving an unsolicited bid for your business, your initial steps are crucial in setting the stage for a successful outcome. Here are the key actions to consider:


1. Assemble Your Advisory Team [2][5][6]:

  • Engage a qualified investment bank for financial expertise [6].

  • Hire legal counsel to navigate legal complexities [6].

  • Contract a proxy solicitor for shareholder matters [6].

  • Appoint a public relations firm to manage communication [6].

  • Keep your board informed and involved in the process [6].


2. Evaluate the Offer [2][7][12]:

  • Determine the buyer’s motives and the potential impact on your business [2].

  • Conduct a business valuation to understand your company's worth [2][14].

  • Compare the offer against recent sales of comparable companies [12].

  • Consider the buyer's plan for you and your management team post-sale [12].


3. Maintain Confidentiality and Control [2][7][11]:

  • Request a confidentiality agreement before disclosing any information [7].

  • Have a representative handle initial discussions to maintain distance [7].

  • Continue operating your business at its full potential during negotiations [11].

  • Do not rush into a decision; ensure you are ready and willing to proceed [4].


Remember, an unsolicited bid can be as much an opportunity as it is a surprise. Take your

time to understand the full implications before moving forward.


Understanding the Value of Your Business


When you're approached with an unsolicited bid, understanding the value of your business is paramount. Here's how to assess your company's worth:


1. Conduct an Independent Valuation [9][11][19]:

  • Obtain an independent valuation to avoid underpricing or overpricing your business [11].

  • Use the Market Approach, comparing your business to similar transactions [19], or the Income Approach, estimating the present value of future benefits [19].

  • Chartered Business Valuators can provide a formal valuation or pricing analysis [19].

2. Assess Financial Implications [9][13][18]:

  • Consider the offer in terms of enterprise value, including debt and potential synergies [13].

  • Ensure the sale proceeds cover your financial needs for a comfortable lifestyle post-sale [18].


3/ Evaluate the Offer's Structure [2][13][19]:

  • Analyze terms affecting deal value, like stock or asset sale and purchase price allocation [2].

  • The form of payment, purchase structure, and price allocation all impact what you receive [13].

  • Capitalized Cash Flow or Discounted Cash Flow methods may be used based on your business's maturity and growth potential [19].


By taking these steps, you'll be better equipped to respond to an unsolicited offer and negotiate effectively.


Evaluating Your Options


When evaluating your options after receiving an unsolicited bid, it's crucial to analyze the offer from multiple angles to ensure it aligns with your business strategy and personal goals.

Consider the following:


Strategic Fit and Impact: Assess how the acquiring company's mission and values align with your own. Think about how the acquisition would affect your employees and any existing business opportunities or succession plans you have in place. Reflect on the cultural integration and the future direction of your company post-acquisition [9].


Financial and Legal Considerations: Review the offer's financial details, including debt and tax implications. A comprehensive review of your company's defensive profile can reveal vulnerabilities and available defense mechanisms, which could influence your decision [6][9]. Ensure you understand the deal structure, as it will affect your net after-tax proceeds [23].


Response Strategy: Gather your advisory team to discuss the bid's credibility and the intentions behind it. Before sharing sensitive information, secure an NDA to safeguard your interests [22]. If the offer isn't the best one available, consider creating a competitive market to maximize your business's value [23]. When crafting your response, whether you're accepting, declining, or negotiating, provide clear reasons and keep communication open for future opportunities [22].


Remember, preparing your business for sale can increase its appeal and reduce risks for potential buyers [24]. Evaluate each aspect carefully to make an informed decision.


Seeking Professional Advice


When faced with an unsolicited bid, it's crucial to seek professional advice to navigate the situation's complexities. Here are steps to ensure you get the best guidance:


Assemble Your Advisory Team:

  • Start with a Certified Public Accountant (CPA) who can serve as the quarterback of your advisory team, offering both business and tax advice [11].

  • An attorney with experience in mergers and acquisitions will be indispensable for legal guidance [11].

  • Add an investment banker to your team who can assist with financing the deal and act as an intermediary during negotiations [11].

  • A financial planner will help with wealth management and succession planning, ensuring your personal financial goals are met [11].

  • Consider including a tax specialist to navigate the implications of the deal on your personal and business taxes [12].


Protect Sensitive Information:

  • Insist on a confidentiality or non-disclosure agreement before divulging any business details [16].

  • Keep initial conversations high-level to avoid sharing sensitive information prematurely [16].

  • Understand the potential buyer's acquisition history and financial capacity by asking the right questions [15][16].

Red Flags and Deal Structuring:

  • Be aware of red flags like pressure tactics or lack of transparency which could indicate potential problems down the line [20].

  • Engage advisors who can help you structure the deal to maximize value and align with your business strategy [12].

  • Implementing strong accounting systems and internal controls can enhance your business's value and attractiveness to buyers [21].

  • Remember, expert guidance is not just about evaluating the offer but also about positioning your business effectively to meet current and future financial needs [18][19].


Conclusion


Navigating the complexities of an unsolicited bid requires careful consideration of the offer's strategic fit and impact, along with a thorough understanding of your business's value. By evaluating financial and legal considerations, responding appropriately, and possibly creating a competitive market, you position your business to either capitalize on the opportunity or hold out for a more favorable proposal. The importance of assembling a skilled advisory team cannot be understated, as it ensures that every decision is informed and aligned with both business strategy and personal financial goals.


In the journey of responding to an unsolicited bid, the role of professional advice emerges as a cornerstone for safeguarding and maximizing the value of your business. Whether you're considering an offer or actively seeking the next step for your company, the insights and expertise of seasoned advisors can make a significant difference in the outcome. Should you find yourself weighing such a momentous decision, remember you're not alone—please contact me for support. With the right team and knowledge, you have the power to steer your business toward a successful future.


References

[1] - https://www.investopedia.com/terms/u/unsolicited-bid.asp [2] - https://www.midstreet.com/blog/unsolicited-offer-on-your-business [3] - https://icrinc.com/insights/unsolicited-bids-communicating-with-stakeholders/ [4] - https://www.navixconsultants.com/the-exit-playbook/what-should-you-do-with-all-those-unsolicited-offers-to-buy-your-business-part-1 [5] - https://www.mercadien.com/resource/what-to-do-when-you-receive-an-unsolicited-offer-to-sell-your-business/ [6] - https://www.gibsondunn.com/first-steps-upon-receiving-an-unsolicited-takeover-proposal/ [7] - https://www.securedocs.com/blog/what-to-do-when-you-get-an-unsolicited-offer-to-buy-your-business [8] - https://thedvsgroup.com/what-to-do-if-you-get-an-unsolicited-offer-for-your-business/ [9] - https://www.esoppartners.com/blog/unsolicited-offer-policy [10] - https://zacharyscott.com/the-unsolicited-purchase-offer-what-to-do/ [11] - https://www.marcumllp.com/insights/unsolicited-offer-business-owner-proceed [12] - https://ccabalt.com/10-questions-to-ask-when-you-receive-an-unsolicited-offer-to-buy-your-business/ [13] - https://stillwatercapital.ca/evaluating-an-unsolicited-offer/ [14] - https://businessappraisalflorida.com/blog/navigating-unsolicited-offers-to-buy-your-business/ [15] - https://www.equiteq.com/resources/dealing-with-unsolicited-bids [16] - https://www.mossadams.com/articles/2019/june/navigate-offers-to-purchase-your-business [17] - https://www.linkedin.com/pulse/what-should-i-do-get-unsolicited-offer-buy-my-company-ryan-tansom [18] - https://www.rgcocpa.com/news/where-to-start-when-you-receive-an-unsolicited-interest-to-buy-your-business/ [19] - https://www.smythecpa.com/blog/when-to-value-a-company-part-8-evaluating-an-offer-to-purchase-your-business/ [20] - https://www.vikingmergers.com/blog/evaluating-unsolicited-offers/ [21] - https://www.cohencpa.com/knowledge-center/insights/february-2024/knowing-your-worth-fundamentals-of-business-valuation-during-a-sale [22] - https://www.forbes.com/sites/forbesbusinesscouncil/2021/05/11/what-should-you-do-when-you-receive-an-unsolicited-offer-for-your-company/ [23] - https://www.wilcoxinvestmentbankers.com/how-to-respond-to-an-unsolicited-offer-to-buy-your-business/ [24] - https://www.linkedin.com/pulse/you-prepared-unsolicited-offer-buy-your-business-ryan-binkley [25] - https://www.53.com/content/fifth-third/en/financial-insights/business/mergers-acquisitions/responding-to-an-unsolicited-m-a-offer.html [26] - https://www.linkedin.com/pulse/what-do-you-receive-unsolicited-offer-buy-your-mmerf [27] - https://www.mgmt.ucl.ac.uk/news/embracing-unsolicited-advice-can-benefit-your-workforce [28] - https://hbr.org/2015/01/the-art-of-giving-and-receiving-advice



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