Publications

Responding to Unexpected Acquisition Offers

Peter Hubert, Partner, MDN Group

In today’s European business markets, successful privately held companies are receiving an increasing number of unsolicited acquisition offers.  Whether from private equity firms or strategic buyers, these unexpected proposals require careful consideration and a structured approach to evaluation. 

This comprehensive guide will help business owners navigate this complex situation while protecting interests and maximising opportunities.

Understanding the Buyer’s Strategic Intent

When private equity firms or strategic buyers approach with unsolicited offers, they typically have already conducted preliminary research and identified specific synergies or growth opportunities. These buyers often prefer direct negotiations to avoid competitive bidding situations, potentially enabling them to secure more favourable terms.

“In today’s market, we’re seeing buyers invest considerable resources in identifying and approaching potential acquisition targets directly,” says David Wong, Partner at MDN Group. “While this can create interesting opportunities for business owners, it’s crucial to understand that these buyers often want to bypass competitive processes to secure more favourable terms.”

For European business owners, appreciating that while such offers might seem flattering, they represent just one of many potential strategic options. The key is to maintain a balanced perspective and avoid rushing into decisions that could impact years of business building.

Market Valuation Assessment

The foundation of any response to an unsolicited offer has to be a thorough understanding of your company’s actual market value. This begins with a full analysis of current industry multiples in the European market and recent comparable transactions in your sector. 

A detailed evaluation should look at your company’s growth trajectory and market position, along with any unique intellectual property or market advantages that could command a premium. Remember that potential synergies with the prospective buyer might justify a higher valuation than a standalone market comparison could indicate.

Strategic Timing Considerations

Market timing plays a vital role in maximising value. 

The European business outlook constantly changes, and your decision should consider current economic conditions and industry-specific trends. Consider whether your company is at an optimal point in its performance cycle and whether any upcoming regulatory changes might impact valuation. The competitive landscape and its ongoing developments should also influence your timing decisions.

Organisational Preparedness

Before proceeding with any serious discussions, assess your organisation’s readiness for:

• Comprehensive due diligence requirements
• Financial statement scrutiny and compliance reviews
• Operational assessment by external parties
• Management team stability and succession planning

Strategic Negotiation Support

Professional M&A advisors bring invaluable expertise to the table through their deep understanding of European transaction landscapes and current deal structures. 

Their experience in managing complex cross-border transactions and navigating EU regulatory requirements can be vital to achieving the best outcome. Advisors understand the nuances of different markets within the EU and can help structure deals that meet cross-cultural and regulatory challenges effectively.

Building Negotiating Leverage

Even in situations with a single interested buyer, maintaining negotiating leverage is extremely important. This can be achieved by showing readiness for a broader market process and highlighting recent improvements in your operations.

Martin Bakker, Partner at MDN Group, emphasises the importance of maintaining options: “Strong negotiating positions come from having alternatives. Even with an attractive unsolicited offer on the table, we often advise clients to explore multiple options. This approach typically leads to better outcomes, whether through improved terms with the original buyer or the discovery of more suitable alternatives.”

It’s also important to commit to walking away if terms aren’t satisfactory. A robust negotiating position is usually built on strong business performance and clear alternative strategic options.

Moving Forward Strategically

The path forward requires careful planning and execution. 

Begin by assembling a qualified advisory team familiar with EU markets and conducting a thorough internal readiness assessment. Develop clear valuation expectations based on market analysis and prepare a comprehensive communication strategy. 

Having a well-defined timeline and process guidelines will help maintain control of the situation and ensure all stakeholders remain aligned throughout the process.

Conclusion

Unsolicited acquisition offers represent both opportunity and challenge for European business owners. 

While such offers might provide attractive exit opportunities, proper evaluation and professional guidance are essential to achieve optimal outcomes. By maintaining a structured approach and seeking appropriate advice, business owners can make informed decisions that align with their long-term objectives and maximise value realisation.

Remember that time is often on the seller’s side, and rushing decisions rarely leads to the best outcomes. With proper preparation and guidance, unsolicited offers can be transformed into valuable opportunities for business owners to achieve their strategic and financial objectives.