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As M&A Slumber, Activists Keep Right on Rolling

By Tim Luscombe

The owner of a London telecom infrastructure provider has spent the last 25 years building a solid business he can eventually pass on to his children. Without any warning, he receives an unsolicited offer to buy from a larger competitor. What should he do? The first thing is to not panic. Unsolicited offers can be addressed calmly, rationally, and with enough forward thinking to protect the business owner’s interests.

As an M&A consultant with more than 30 years experience, I am very familiar with unsolicited offers. I have been on both ends of them. I know first-hand that the worst thing a business owner can do is panic at the thought of selling what he or she has worked so hard to build. I also know that sometimes selling is appropriate, other times it’s not.

In a very general sense, there are two things that need to be evaluated upon receipt of an unsolicited offer. First is the seriousness of the buyer; second is the value of the offer itself. An experienced consultant offering business broker services should be able to advise in both areas.

Evaluating the Buyer

The world of mergers and acquisitions has often been compared to flea markets and antique fairs. Prospective buyers peruse the aisles not knowing whether they truly want to buy or not. If they see something that catches their eye, an offer might be made. Sometimes the only purpose of an offer is to determine how eager the seller is to sell.

Mergers and acquisitions can work the same way. It’s not unusual for a business owner to get an unsolicited offer from a buyer who is doing nothing more than shopping. A competent M&A consultant will know enough to evaluate that buyer from head to toe.

The consultant can look at the buyer’s history of acquisitions. The buyer’s current business can be examined in light of its viability, profitability, and future potential. A buyer can even be evaluated in terms of his or her intent, whether it is hostile or friendly. If a thorough analysis reveals the buyer is legitimate and trustworthy, the offer can then be evaluated.

Evaluating the Offer

No business owner wants to sell if the risk of being taken advantage of exists to even the smallest degree. A proper evaluation of the offer in question therefore becomes critical. The business owner needs to know if an offer is legitimate, fair, friendly, and in his/her best interests.

An offer’s legitimacy must be evaluated in light of the fact that you can have a very serious buyer making a good offer but without the means to complete the transaction. As for fairness, friendliness, and the best interests of the owner, the need to evaluate an unsolicited offer should be obvious.

Receiving an unsolicited offer is not a call to panic. With the help of a proven M&A consultant, a business owner can properly evaluate the offer before coming up with a wise decision.

By Tim Luscombe.

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