Dealing With Unsolicited M&A Offers

It is common for businesses that are showing rapid growth and success to be approached with unsolicited acquisition offers. However, just because another business presents you with an acquisition offer doesn’t mean that it’s always a good offer. Therefore, it’s important for businesses to evaluate each offer carefully in order to ensure that it is in the best interest for your business before agreeing to it.

Additionally, it’s also a good idea to create an intense competitive situation in order to maximize the valuation of the potential merger as well as the overall impact and future of the business. Here we will discuss how to interpret unsolicited M&A offers, how to determine if an offer is worth pursuing and how to respond to each offer. For example, two out of three technology businesses (particularly smaller tech companies) receive at least one unsolicited acquisition offer during extreme growth phases.

Because the market is currently in an active M&A cycle, many smaller businesses are receiving unsolicited M&A offers by larger companies. Here are some key pointers to take into consideration as your company receives potentially lucrative unsolicited M&A offers.

Why Unsolicited Offers Are Rarely the Best Offer

When a strategic buyer approaches a company directly — before a formal process has been run — they are doing so because they believe they have an information advantage. They know the seller has not tested the market, has no competing bids on the table, and may not have a full picture of their company’s fair market value. That information asymmetry almost always benefits the buyer, not the seller.

Unsolicited offers tend to arrive as flattering letters of intent or informal conversations that convey urgency and exclusivity. Sellers should recognize this dynamic: an acquirer willing to approach you directly is clearly motivated, which means there is likely more value to unlock by running a structured, competitive process rather than responding to a single inbound bid.

1. Understand the Valuation of the Business. After receiving an unsolicited acquisition offer, the first thing an entrepreneur or business owner should do is to compare the value of the offer to the overall value of the business. Most unsolicited offers are presented at the lowest possible valuation (in a non-competitive situation, of course). This is because most acquirers know whether or not there are other offers on the table. If the acquirer knows that their offer is the only one, then it will likely be presented at the lowest value — regarding both valuation and deal terms.
2. Create Backup Plans and Leave Options Open. If a business owner or entrepreneur chooses to pursue an offer and begin the M&A process, then it’s important to have other backup options, particularly before entering an agreement. This is because agreements can easily fall through, especially if the terms of the agreement don’t meet the needs of the business. One strategy to mitigate this is to create compelling offers and solid backup options by running a competitive analysis.
3. Run a Competitive Investment Banking Process. Once a business is approached with an unsolicited offer, the business should then work with an investment banker to seek out some likely buyers to drum up compelling and competing offers. This strategy will expand the pool of potential acquirers, ultimately creating a highly competitive situation and also increasing valuation. However, it’s important to note that the best offers require sharp positioning, tactful negotiation, and selecting the most desirable terms from each offer. The majority of businesses would not be able to increase the valuation of an unsolicited offer without a comprehensive competitive strategy in place. As mentioned above, these strategies and solid backup options optimize offers, mitigate risks, and increase the valuation of the deal.

How to Evaluate Deal Terms Beyond the Headline Price

Price is only one dimension of an acquisition offer. Sellers who focus exclusively on the stated purchase price often overlook terms that can significantly erode actual value received. When reviewing any offer — solicited or otherwise — pay close attention to the following:

• Cash vs. equity consideration — all-cash deals at close are fundamentally different from stock-for-stock transactions where the seller takes on buyer risk.
• Earnout provisions — deferred payments contingent on future performance can dilute headline value if milestones are not clearly defined or achievable.
• Representation and warranty obligations — broad indemnification clauses can expose sellers to post-close liability well beyond what they anticipated.
• Management retention requirements — many acquirers require founders or key executives to stay on for a defined period, sometimes with compensation that replaces the upside they expected from the deal.

A thorough understanding of these provisions is part of what makes the due diligence process so important. Sellers who engage experienced advisors early are better positioned to identify and negotiate unfavorable terms before they become binding. For additional perspective on navigating early-stage M&A conversations, see the companion article on dealing with an unsolicited offer.

Preparing Before You Respond

One of the most common mistakes sellers make when receiving an unsolicited offer is responding too quickly without first organizing their own affairs. Before engaging in substantive discussions with any potential acquirer, owners should consider:

• Reviewing financial statements to ensure they are clean, current, and accurately reflect normalized earnings.
• Assembling core business documentation — customer contracts, employee agreements, IP registrations — so that a data room can be stood up quickly if needed.
• Identifying a short list of additional potential buyers who could be contacted to create competitive tension.
• Consulting with legal and tax advisors to understand the structural implications of different deal formats.

Running these preparation steps in parallel with any initial conversations keeps the seller in a position of strength. If you are weighing an inbound offer and want a disciplined framework for responding, prepare a transaction overview to assess your options before committing to any path.

In Summary

In summary, businesses that are showing rapid and successful growth and expansion are likely to be approached with unsolicited offers. However, each and every offer should be approached and considered with the best interest of the business in mind. Business owners, entrepreneurs, and executives should evaluate each offer carefully, assessing the terms and the value of the offer, and then run a competitive analysis to determine the overall value of the business as well as attract likely buyers that are the best fit for the business’ strategy.

Businesses that take this approach when receiving unsolicited offers often result in the most successful M&A deal.

Frequently Asked Questions

Should I immediately engage with an unsolicited buyer?

Not necessarily. It is appropriate to acknowledge receipt of the interest and gather preliminary information, but you should avoid signing any exclusivity agreements or sharing sensitive financial data until you have assessed whether to run a broader process. Exclusivity handed to one buyer early in a process can eliminate the competitive tension that drives premium valuations.

How do I know if the price in an unsolicited offer is fair?

Comparing the offered price to an independent business valuation is the most reliable starting point. Engaging an investment banker who can benchmark your company against recent comparable transactions will give you a more grounded sense of whether the inbound offer reflects fair market value or a below-market opening bid.

What is the role of an investment banker when responding to an unsolicited offer?

An investment banker can quickly assess the offer, help you understand your alternatives, contact other potential buyers to create competition, and manage the negotiation process on your behalf. Their involvement signals to the inbound acquirer that you are taking the process seriously and are prepared to walk away if terms are not improved.