If you serve business owners with revenue over $10 million, here's something you need to know: Your clients are being bombarded with unsolicited offers from private equity firms, family offices, and strategic buyers.
While these offers might seem flattering at first glance, they often mask a carefully orchestrated strategy to acquire companies at below-market values.
The Dangerous Allure of the One-on-One Deal
Consider this analogy: Your client might be the most talented athlete in the world, but if they've never played golf and you put them up against a club pro who's played the course hundreds of times, who's going to win? The pro, every time. This same dynamic plays out in business sales when owners negotiate one-on-one with sophisticated buyers.
The reality is stark: Buyers deliberately target business owners, hoping to engage them before they start working with an investment bank or M&A advisor. They invest heavily in developing proprietary deal flow, because they know they'll get a better deal through direct negotiation.
Their playbook often includes:
- Making exciting but unrealistic initial offers
- False promises to close quickly
- Pushing for exclusive negotiations
- Extracting more working capital than the business needs
- Shifting transaction risks to the seller
- Employing various other tactics (both ethical and unethical)
Their job isn’t to pay the highest price or the most cash at close. It’s to get the highest ROI on their investment. If these strategies didn’t pay off, buyers would save millions in business development costs and wait to evaluate businesses on the open market.
Data Tells the Story
Over the past five years at Cornerstone, we've developed a rapid response plan to assist clients who’ve received unsolicited offers. The results are telling:
- Not once has the unsolicited buyer walked away from the deal (not once!)
- Our process consistently generates 5-10 competing offers.
- Every single seller has ultimately chosen a different buyer who offered better terms, value, or cultural fit.
Why This Matters to You as Their Advisor
When your client mentions receiving an unsolicited offer, it should set off immediate alarm bells. Here's why:
- Once they sign a letter of intent (LOI), their options vanish. The buyer has them exactly where they want them.
- Without proper representation, they're likely leaving millions on the table.
This is a once-in-a-lifetime transaction involving what is probably their largest asset—one they're incredibly emotionally tied to. You need to call an investment banker to help you understand the business’s true market value and run a process that drives value for your client.
The Path to Protecting Your Clients
Remember, running a company and selling a company require entirely different skill sets. Your clients don't know what they don't know. By bringing in the right team before they sign an LOI, you can:
- Create competitive tension that drives better terms and value.
- Give them options to choose the right successor for their legacy.
- Ensure they maintain leverage throughout the negotiation process.
- Help them avoid seller's remorse and "what-if" scenarios.
- Ultimately give them peace of mind.
Your Opportunity as Their Advisor
When you help clients navigate this challenging terrain by assembling the right team, you demonstrate true trusted advisor status. This isn't just about protecting their interests in a single transaction—it's about positioning yourself as their long-term financial guide.
The peace of mind that comes from knowing they got the best possible deal, chose the right successor, and protected their legacy is priceless. More importantly, clients who feel this level of protection and guidance tend to work with their advisors the rest of their lives.
For example, in the last deal with did with a financial advisor partner, the client’s business sale proceeds were wired directly into the financial advisor account.
The Critical Timing Factor
Here's the crucial point: Your client needs specialist M&A support before they sign an LOI. Once they've signed, the window of opportunity closes. That's why it's essential to act fast when a client mentions an unsolicited offer.
As their trusted advisor, you have the power to protect them from potentially leaving millions on the table. By understanding the true nature of unsolicited offers and having the right response ready, you can help your clients achieve the exit they deserve while cementing your role as their forever financial guide.
That unsolicited offer might seem flattering, but it's often the first move in a game where your client is severely disadvantaged. Your role is to level the playing field before it's too late.
You don’t have to be an M&A expert to do that. You just need to start the conversation with an M&A specialist and then, in true EPI fashion, we all work together for the benefit of the client.
Take the Next Step
Get to know how Cornerstone Business Services partners with financial planners, CPAs, and other trusted advisors. We'll help you protect your business owner clients' interests while building your AUM through successful exits. Let’s work together to get your next $100 million with just five to 10 clients.
Connect with us to learn more about our collaborative approach to creating win-win outcomes for you and your clients.
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