Key takeaways
- Unsolicited offers are typically 15–30% below what a competitive process would produce. The buyer approached directly because avoiding a banker process is how they acquire businesses at a discount.
- The first 72 hours are critical: do not sign anything, do not share financials, and do not signal that you are ready to sell.
- Before responding, answer five questions: what multiple is this offer, is the buyer qualified to close, what would a competitive process produce, what would a process cost, and are you willing to lose this buyer if you run a process.
- NDA negotiation matters: insist on a mutual NDA, define what is confidential, and include a standstill that prevents the buyer from contacting employees or customers.
- LOI exclusivity is the moment the leverage shifts permanently to the buyer. Do not sign exclusivity without first running at least an informal market check with 3–5 comparable buyers.
- Engaging a transaction advisor — even informally, even for a few weeks — before responding to an unsolicited offer is the highest-ROI action available.
In this article
- Why buyers make unsolicited offers
- What to do in the first 72 hours
- How to evaluate the offer on its merits
- NDA negotiation: what matters and what does not
- The four possible responses to an unsolicited offer
- The exclusivity trap: why LOI timing matters more than anything else
- What to say to the buyer while you evaluate the offer
- Evaluating buyer seriousness and readiness
- When accepting the direct offer makes sense
Proprietary (off-market) deals — those acquired without a banker process — close at multiples 10–20% below comparable banker-run processes on average
Buyers who initiate unsolicited approaches to businesses have typically completed significant internal analysis; they know what they are willing to pay and they have structured the approach to minimize competitive pressure
Founders who engage an advisor within 30 days of receiving an unsolicited offer are substantially more likely to either improve the offer materially or identify a better alternative buyer
Most M&A guides assume you are running a process. But a significant share of lower middle market transactions begin differently: a buyer calls, sends a letter, or approaches the founder directly with an indication of interest. It might be a strategic competitor, a PE firm, or a search fund operator. The number they mention sounds reasonable. The process sounds simple.
This is one of the highest-stakes moments in a founder's financial life, and it is the moment when most founders have the least information and the least leverage.
10–20%
Typical discount in off-market deals vs. competitive banker processes
$0
What most founders spend on advisory before responding to an unsolicited offer — which is the problem
30 days
The window in which an advisor can meaningfully improve your position before you have implicitly agreed to the buyer's terms
How to Respond to an Unsolicited Offer
Why buyers make unsolicited offers
Unsolicited buyers are not doing the seller a favor. They are pursuing a deliberate sourcing strategy designed to acquire a business at a lower cost than a competitive process would require. Understanding why they approach directly is the first step in evaluating the offer on its actual merits.
Why Buyers Approach Founders Directly
Avoid competitive tension
In a banker process, 10–20 buyers see the same information and bid against each other. Multiples expand under competition. A buyer who approaches directly eliminates that competition entirely.
Anchor the founder on their number
The first number a founder hears becomes the reference point. A buyer who says "$12M" before the founder has context anchors the negotiation at $12M — even if the business would fetch $17M in a process.
Build a relationship before the process starts
Some buyers approach early to build rapport. By the time the founder considers running a process, they feel loyal to the relationship. That loyalty is a negotiating advantage for the buyer, not the seller.
Acquire at a discount by offering certainty
"We can close in 90 days with no banker, no process, no disruption" is genuinely valuable to some founders. The buyer is offering certainty and simplicity in exchange for a price reduction. This is a legitimate trade — but the founder needs to know the size of the discount to evaluate whether it is worth it.
Test founder interest without full commitment
A buyer who is not certain they want to acquire a business can float a number to gauge interest. If the founder is receptive, they pursue it. If not, they move on with no cost. The founder has more information to lose from this exchange than the buyer does.
A buyer who approaches you directly has already done their homework. They have modeled the business using publicly available information, talked to people who know you, and determined that the business is worth pursuing. That preparation is a data point: they believe the business has value. The question is whether their offer reflects that value or whether they are attempting to acquire it at a discount.
What to do in the first 72 hours
The first 72 hours after an unsolicited approach are the period in which most founders inadvertently give away leverage. The common mistakes: expressing premature interest, suggesting you have already been thinking about selling, sharing financial data informally, or agreeing to meet without any protective framework in place.
Step 1: Acknowledge without committing
Respond professionally and with interest — you do not want to shut down the conversation — but do not indicate that you are ready to sell, considering a process, or receptive to their specific timing.
Step 2: Do not share financials
Any request for financial data — revenue, EBITDA, margins, customer breakdown — should be declined until you have a signed NDA and a clearer sense of buyer seriousness.
Step 3: Call a readiness advisor
Before you engage substantively with the buyer, get a current perspective on what your business is worth in a competitive context. This takes 2–5 business days.
Step 4: Research the buyer
Understand who is approaching you: what they own in your sector, what multiples they have paid in comparable transactions, whether they are approaching multiple companies simultaneously, and whether they have a genuine platform thesis or are opportunistically fishing.
Step 5: Decide on process strategy
Before the second meeting with the buyer, decide: are you going to engage exclusively with this buyer, or are you going to use this approach as a catalyst to run a competitive process? That decision drives every subsequent move.
A founder of a $3.2M EBITDA industrial services company received an unsolicited call from a PE firm's associate indicating a range of 5.5x–6.5x EBITDA. Flattered and surprised, she agreed to share three years of financials within 48 hours. Four months later she had progressed through two months of due diligence with this single buyer before an advisor friend suggested a competitive process. The advisor ran a 6-week targeted outreach to 12 buyers. Final bids ranged from 7.0x to 8.25x. The founder left $2.5M–$6.4M on the table from the moment she shared financials before establishing any competitive context.
Resist the urgency the buyer creates. PE deal teams are trained to accelerate the timeline, create a sense of scarcity ("we are deploying capital this quarter"), and establish exclusivity before the seller has benchmarked their options. These tactics work because they create artificial time pressure on a decision that deserves careful analysis.
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Before you can evaluate an unsolicited offer, you need context. Most founders do not have current-year financials that have been normalized for add-backs, a clear sense of the prevailing multiple in their industry and size range, or a view of what other buyers would pay. All of that context has to be built before you can respond intelligently.
The 5 Questions to Answer Before Responding
1. What multiple is this offer at?
Divide the enterprise value in the offer by your trailing 12-month normalized EBITDA. If the offer is $12M and your EBITDA is $2M, that is 6x. Is 6x reasonable, low, or high for your industry and size? You need market comp data to answer this. See [how PE firms model your business](/insights/how-pe-models-your-business) to understand the buyer's math.
2. Is this buyer qualified to close?
Not all buyers who make offers can fund them. PE firms backed by committed capital are typically reliable. Strategic acquirers with strong balance sheets are typically reliable. Search fund operators and individual buyers vary widely. Before engaging seriously, confirm the buyer has the capital or financing capacity to close. Understanding [PE vs. strategic buyer differences](/insights/selling-to-pe-vs-strategic-buyer) helps evaluate what each buyer type is likely to offer and require.
3. What would a competitive process produce?
A competitive banker process in the lower middle market for a $2M–$5M EBITDA business typically produces final bids 10–20% higher than a single-buyer direct offer. On a $12M offer, that is $1.2M–$2.4M. That is the cost of accepting the direct offer.
4. What would a process cost you?
A full banker-run process takes 9–12 months, costs $100K–$400K in advisory fees (paid at close from proceeds), and requires substantial management time. The process premium needs to exceed the process cost — financial and personal — for a process to be the better choice.
5. Are you willing to lose this buyer?
If you run a process, the direct buyer may walk — either because they do not want to compete or because they are offended by the approach. For some buyers and some sellers, this is not a risk worth taking. The answer depends on how much you want this specific buyer and how confident you are that a process would produce comparable alternatives.
6x–8x
Typical LMM EBITDA multiple range in competitive processes (varies by industry and size)
10–20%
Typical discount in a direct offer vs. a competitive process
$200K–$400K
Cost of a full banker process paid from proceeds at close (varies by deal size)
NDA negotiation: what matters and what does not
The first formal step after an unsolicited approach is typically an NDA. Most founders sign whatever the buyer sends because they want to move the conversation forward. This is a mistake. The NDA is a negotiating document, and its terms matter.
Insist on a mutual NDA. Buyer-only NDAs protect buyer confidential information — which you will not receive anyway — without protecting yours. A mutual NDA creates parity. Most buyers will accept mutual NDAs without significant pushback.
Define what is confidential with specificity. "All information shared in connection with the potential transaction" is too broad. The definition should cover financial statements, customer lists, employee information, and operational data — not vague categories that could extend to public information or general business knowledge.
Include a standstill provision. A standstill prevents the buyer from contacting your employees, customers, suppliers, or lenders directly during the evaluation period. This protection is particularly important if the buyer is a competitor or if word of a potential transaction reaching your workforce could create operational disruption.
Specify a time-limited confidentiality obligation. Perpetual confidentiality obligations are rare in practice and create long-term complications. A 2–3 year confidentiality period after the last disclosure is market standard.
2–3 years
Market standard confidentiality period in LMM NDAs
Standstill
The most important NDA provision for founders
Mutual
The right NDA structure; buyer-only NDAs are unbalanced and should be rejected
The four possible responses to an unsolicited offer
When an unsolicited buyer approaches, there are four strategic choices. Each has a different risk/reward profile and the right choice depends on your situation.
Response 1: Engage with the buyer directly and negotiate a bilateral deal. This makes sense when: you are ready to sell soon, you genuinely prefer this buyer over alternatives (cultural fit, employee treatment, strategic rationale), the multiple offered is within acceptable range of the market, and the cost and disruption of a process is not worth the incremental value. The risk: you may leave significant money on the table without knowing it.
Response 2: Conduct an informal market check before responding. Contact 3–5 other buyers — advisors can do this confidentially — to gauge interest and get informal indications of value before engaging with the unsolicited buyer. This does not require a full banker process. It produces enough information to know whether the original offer is competitive. If others express similar or stronger interest, you have the foundation for a process. If not, you can return to the original buyer with more confidence that their offer is fair.
Response 3: Run a full competitive banker process. Engage a transaction advisor, run a formal process, and let the market determine value. This is the right choice when: the business is in a favorable market, the timing is right, you have the management bandwidth to support a 9–12 month process, and the expected premium justifies the cost and disruption. The unsolicited buyer may or may not participate.
Response 4: Decline and continue building. If the offer is materially below what you believe the business is worth and the timing is not right, declining is a legitimate choice. Buyers rarely walk away permanently from a business they want — they often come back in 12–18 months, sometimes with a better offer after seeing continued growth.
The exclusivity trap: why LOI timing matters more than anything else
In an unsolicited offer scenario, the most consequential decision is not the price — it is when you grant exclusivity. Once you sign a letter of intent with an exclusivity provision, you have agreed to stop talking to other buyers for the duration of the exclusivity period (typically 60–90 days). During that window, the buyer controls the timeline, the diligence process, and the negotiating dynamics. You have given up your most important source of leverage: the threat of walking away to another buyer.
Buyers know this. The reason they include exclusivity in a letter of intent is not administrative convenience — it is to lock out competition at the moment the founder is most excited about the deal and least likely to push back. The LOI is the moment the leverage shifts, and it shifts permanently unless the buyer fails to close.
Do not sign exclusivity until you have done a market check. This can be accomplished in two to four weeks. An advisor can approach four or five qualified buyers on a no-name basis ("a confidential search process for a business with the following characteristics") and gather letters of interest. Even if those letters are not competitive bids, their existence changes the dynamic: the unsolicited buyer knows you have options, which moderates their behavior during diligence and in purchase agreement negotiations.
60–90 days
Typical exclusivity window in an LOI; the period during which you cannot talk to other buyers
2–4 weeks
Time needed for an informal market check before signing exclusivity
$0
The cost of a market check conversation vs. $1M–$3M of value potentially left on the table by signing exclusivity too early
"A founder of a $3.1M EBITDA specialty distribution business received an unsolicited LOI at 5.8x EBITDA from a PE-backed strategic. He liked the buyer and was inclined to accept. Before signing the LOI, his attorney introduced him to a transaction advisor who ran an informal, three-week market check with five other buyers. Two submitted indications of interest above 7x. The founder returned to the original buyer and negotiated to 6.8x — a $3.1M improvement on the headline — before running a full process with all three interested parties. Final deal closed at 7.2x with the original unsolicited buyer, who remained in the process and submitted the best final bid. Total value of the market check: more than $4M."
What to say to the buyer while you evaluate the offer
The most common founder mistake when receiving an unsolicited offer is responding too quickly. Whether the response is enthusiasm or rejection, both can damage the negotiating position. The right response is measured, professional, and buys time without signaling weakness or disinterest.
How to Respond to an Unsolicited Approach
First contact (call or email)
"Thank you for reaching out. We are always open to conversations about the business. Let me review what you have shared and get back to you within the next couple of weeks."
After reviewing the indication
"We appreciate the interest. Before we respond formally, we want to make sure we have an accurate understanding of our current financials and market context. We expect to be in a position to have a more substantive conversation in [3–4 weeks]."
If asked to sign an NDA early
Sign a mutual NDA — this is standard and does not commit you to anything; it just protects both parties in the discussion
If pressed for a timeline
"We are moving thoughtfully. We want to make sure any process we engage in is the right one for the business and our stakeholders." — do not commit to a specific date
If the buyer applies urgency ("we need an answer by Friday")
"We understand your timeline. We are working on this and will be in touch." Artificial urgency is a negotiating tactic; do not let it compress your decision window
Never tell an unsolicited buyer "we are not interested in selling right now" unless you genuinely mean it. That statement closes a door that can be hard to reopen and it may not be true — you might be very interested in selling at the right price. "We are open to conversations but want to approach this thoughtfully" preserves optionality without signaling desperation.
Evaluating buyer seriousness and readiness
Not every unsolicited approach represents a serious acquisition intent. Some buyers are conducting market intelligence, gathering competitive information, understanding business model economics, or assessing the seller's interest for a potential future transaction. Distinguishing serious buyers from intelligence-gatherers is a critical skill.
Signs of a serious buyer: they have a clear articulation of why your business fits their specific portfolio or platform strategy; they have closed comparable transactions in your sector recently; they have a named decision-maker and a defined approval process; they are willing to sign an NDA and provide a preliminary valuation range; and they respond to your questions about financing and timeline with specificity.
Signs of a buyer who is fishing: vague thesis ("we are interested in businesses like yours"); no recent comparable transactions in your sector; requests for detailed financial information before providing any preliminary valuation; inability to define a decision timeline; and references to "needing to see more before they can say anything about value."
Even a credible, serious buyer benefits from a competitive process. The goal is not to keep buyers engaged indefinitely without progress — it is to use the information the approach provides to make a better decision about process strategy, and then execute that strategy efficiently.
When accepting the direct offer makes sense
Not every unsolicited offer should trigger a full competitive process. There are scenarios where accepting a direct offer is the right decision — even knowing that a process would likely produce a higher price.
When a Direct Deal Makes Sense
Health or personal urgency
If a founder faces a health event, family situation, or personal timeline that makes a 9–12 month process genuinely not viable, certainty and speed have real value that should be priced into the trade-off
Deep founder-buyer alignment
Some buyers are genuinely better for the business, the employees, and the founder's legacy than what a broad process would attract. If that specific buyer represents a meaningfully better outcome on non-financial dimensions, the price premium from a process may not be worth it
Business has known issues that would surface in diligence
If the business has a customer concentration risk, a pending litigation, or operational issues that would reduce value in a formal process, a direct deal with less comprehensive diligence may preserve more value than a process that surfaces all the issues
Market timing risk
If the founder believes the current market is near its peak and waiting 12 months for a process could mean selling into a worse environment, the certainty of a current deal at a slight discount to peak value may be rational
Banker fees and time cost exceed process premium
On smaller businesses ($1M–$1.5M EBITDA), the banker fee and process cost sometimes approach the full value of the process premium. In these cases, a direct deal is often the better financial decision when properly modeled
9–12 months
Time cost of a full banker process
3–5%
Typical investment banker fee as % of deal value (minimum fee often $400K–$600K for LMM deals)
$1M–$1.5M EBITDA
Size range where direct deal economics sometimes win over process premium, depending on deal specifics
Frequently asked questions
Should I tell the unsolicited buyer I am talking to other buyers?
Not necessarily. You are under no obligation to disclose your process to a buyer during preliminary conversations. If you sign an exclusivity provision in an LOI, you are agreeing to stop talking to others during the exclusivity window. Before signing exclusivity, you are free to gather market information. How much you disclose about that activity is a judgment call based on your relationship with the buyer and your advisor's guidance.
What if I do not have an investment banker — can I run a process myself?
You can gather informal indications of interest, but running a full competitive process without an advisor is difficult. Buyers in a formal process expect a managed information flow, a process letter, a structured diligence room, and a defined timeline. Attempting to manage that without professional support while also running the business usually produces worse outcomes than engaging an advisor. At minimum, consider engaging a transaction advisor on a limited basis for the market check phase before deciding whether to run a full process.
How do I find out what my business is worth before I respond to an offer?
Three approaches: engage an M&A advisor for a preliminary valuation opinion (typically $10K–$20K for a formal opinion, sometimes included in a relationship conversation); review comparable transaction multiples in your industry on Pitchbook, Axial, or GF Data; and talk to founders who have recently sold businesses of similar size and type. None of these produces a precise number, but together they give you enough context to know whether the buyer's offer is in the right range.
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Disclaimer: Financial figures and case studies in this article are illustrative, based on representative middle market assumptions, and are not guarantees of outcome. Statistical references are drawn from cited third-party research; individual transaction and operational results vary based on business characteristics, market conditions, and deal structure. This content is for informational purposes only and does not constitute legal, financial, or investment advice. Consult qualified advisors for guidance specific to your situation.
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