In the world of business mergers and acquisitions, unsolicited offers can be both an opportunity and a pitfall for unwary entrepreneurs. The host of The Deep Wealth Podcast and nine-figure post-exit entrepreneur Jeffrey Feldberg does a deep dive with Michael Butler, a Senior Director at Footprint Capital, into complexities surrounding sell-side and buy-side engagements, the nuances of navigating unsolicited business acquisition offers, and the key strategies business owners can employ to ensure they come out on top. Learn why an unsolicited offer is the worst offer when selling your business.
Michael Butler brings a storied career with a varied background, including roles such as an auditor and consultant with a Big Four Accounting Firm, a corporate executive, a president of a securities broker and dealer, and even an angel investor. This diverse experience makes him a mythical creature in the investment banking world, well-equipped to offer unparalleled insights into the opaque waters of business acquisitions.
Butler highlighted his drive to assist people in maximizing their potential on both sides of business transactions. His story is a testament to the powerful combination of in-depth industry knowledge and a broad professional network, making him a formidable figure in the investment banking world.
The Lure of Unsolicited Offers
When entrepreneurs receive unsolicited offers, it’s easy to be flattered and even easier to fall into the trap of engaging without a game plan. Butler’s insights offer a cautionary tale and a strategy map for navigating these treacherous waters. The seductive charm of these offers can often mask the hard truth—that they might undervalue the lifetime’s work poured into building a business.
Butler shared captivating insights into what makes businesses attractive to buyers or investors, emphasizing the importance of reducing risk and maximizing opportunity. His criteria for evaluating potential investments—predictable revenue, strong customer relationships, and scalability—offer strategic pointers for business owners aiming to position their companies favorably.
“The real heart of it though, the very first question I would ask someone who’s calling you is, what are you the buyer, or who is the buyer?” Butler advises, suggesting a proactive approach in dealing with unsolicited offers or expressions of interest.
When an unsolicited offer or inquiry about your business arrives, it’s easy to get caught up in the excitement or, conversely, view it as an unnecessary distraction. Yet, as Michael Butler points out, there is a golden opportunity in these interactions if approached correctly. With a strategy focused on asking the right questions before even considering revealing detailed information about your business, you can gain invaluable competitive insights and identify areas for improvement or expansion in your business model.
Turning the Tables: A Strategy for Engagement
Butler suggests a proactive approach to handling unsolicited offers, emphasizing the importance of due diligence and strategic questioning. Critical among his suggestions is the idea of turning the tables—leveraging these inquiries to gain competitive insights without revealing too much about one’s business.
He proposes a series of questions business owners should ask potential buyers or intermediaries, crucially before any nondisclosure agreement (NDA) is in place. These questions are designed to uncover the serious intentions of the inquirer while protecting the information security of the business being inquired about.
Michael emphasizes the importance of leveraging the initial stage where you have the most power — before signing any Non-Disclosure Agreements (NDAs). Some of the pivotal questions to consider include:
- Who is the buyer, and what is their background? This helps ascertain the legitimacy and seriousness of the inquiry.
- What specifically attracted them to your business? Insights here can guide you on what aspects of your business are most appealing in the marketplace.
- What are the buyer’s intentions towards your business post-acquisition? Understanding their long-term plans can help you assess alignment with your own vision and goals for your business.
These questions skillfully flip the script, allowing you to learn about the potential buyer or investor without compromising your business’s sensitive information.
Choosing the Right Path with Professional Guidance
As elucidated by Butler, the path to a successful acquisition or sale is fraught with potential mishaps for the unguided entrepreneur. From the valuation of a business to understanding the market and knowing when to engage, professional guidance becomes indispensable. Butler’s narrative is clear—engaging with professionals like investment bankers early in the process not only prepares businesses for potential acquisition but also ensures they command the value they truly deserve.
In our conversation, Jeffrey Feldberg, co-founder of Deep Wealth, shares his firsthand experience of almost falling into the trap of accepting an unsolicited offer, which would have vastly shortchanged the true value of his business. His encounter underscores Butler’s message: preparedness, professional guidance, and a strategic approach to unsolicited offers can pivot a business from being undervalued to securing a deal that genuinely reflects its worth.
The journey to a successful exit or equity event is long and thought-provoking. Jeffrey Feldberg and Michael Butler both stress the importance of preparation and the value of enlisting experienced advisors. By understanding the buyer’s perspective and strategically enhancing your business’s appeal, you position yourself to maximize outcomes.
Conclusion: The Road to True Valuation
Unsolicited acquisition offers, while flattering, require a strategic, informed response. Michael Butler’s extensive experience and the anecdotal wisdom shared by Jeffrey Feldberg illuminate a path of empowerment for business owners. Leveraging unsolicited inquiries for competitive insights, engaging with professionals for valuation and market positioning, and preparing meticulously for potential acquisitions or sales are essential steps to ensuring that when the time comes, business owners secure a deal that truly reflects the value of their life’s work.
This discussion not only sheds light on the murky waters of mergers and acquisitions but also serves as a beacon for entrepreneurs navigating the challenging yet rewarding journey toward their liquidity event.
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Today, Feldberg's passion is helping you extract your deep wealth. The 90-day Deep Wealth Mastery program helps create a solid foundation for three areas: increasing profits to enterprise value and optimizing post-exit life. Deep Wealth Mastery offers strategies and insights drawn from Feldberg's rich experience. The strategies from the trenches get results. Jeffrey's vision is to increase the social fabric of society one entrepreneur at a time.
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