What to Do When You Get an Inbound M&A Approach

Getting that inbound call from a potential buyer can feel like a defining moment in your journey as a founder. But what you do next matters a lot. Handled well, it could lead to a great deal on your terms. Handled poorly, it can result in a loss of leverage leading to a poor deal or can be a huge waste of time with no outcome.

Here’s what we’ve learned from helping European founders sell to the likes of Apple, Meta and Microsoft, and how to react when a buyer comes knocking.

1. Qualify the buyer before you engage

Just because someone reaches out doesn’t mean a real deal is on the table. We often get told by excited founders that there’s been an inbound approach, but it quickly becomes obvious that there’s no real substance there or what’s worse, there’s either no real intent or no authority on behalf of the person making the approach which can waste an enormous amount of time.

Don’t just accept the interest at face value, but qualify it. Some of the things to consider include:

• Who are you talking to? How senior are they and what is their role?
  • If it is someone relatively junior from Corporate Development, they might just be doing a market scan and looking for information. They might even be buying a competitor.
  • If it is someone from the relevant Business Unit, they may love the idea, but do they have the authority to do a deal? Or are they just tire-kicking?

To know the interest is real and is actionable, you need both a decision-making sponsor from the business unit (who own the commercial need) and corporate development (who will execute any deal) to be engaged in the discussions.

Be polite but cautious. Don’t over-disclose or over-commit too soon. Don’t be shy of asking questions about their intent and their process.

2. Always have leverage. Ideally another option

The best way to negotiate with a buyer is to have alternatives. Even if the inbound offer comes from your dream buyer, keep your cool. You’ll still want them to believe there are other buyers, or at the very least, that you would be prepared to walk away if the deal isn’t good enough. Having competitive tension is always the best way to maximise a deal. Otherwise, they’ll offer the minimum they think they can get away with, rather than the maximum they can afford.

We’d recommend quickly bringing in some credible alternatives, for example other strategic buyers. An inbound approach might stimulate a deal, but to optimise the deal you need to know what else is out there and make sure you sell to the best buyer, not just the one in front of you.

3. Align your stakeholders

Buyers will often try to split stakeholders and exploit misalignment, in order to get a better deal. That’s why it’s crucial that everyone on your side stays consistent from co-founders to board members. What this looks like in practice:

• Agree your objectives with your stakeholders in advance
• Stick to a single narrative about your goals and valuation expectations
• Use an adviser to act as your buffer, maintaining your “higher authority” so you don’t lose leverage

Aligned objectives sends a strong message to your buyer and makes it more likely a deal can be achieved that satisfies all your stakeholders.

4. Stay focused and don’t get swamped by the process

M&A is a very time-consuming process and can take months. The buyer will throw a lot of people at a deal from all sorts of different functions, plus armies of advisers to do due diligence. It can feel overwhelming, especially if your team is a fraction of their size and can be very emotional for founders.

Expect to make a big commitment to answering what seems to be endless data and document requests and intense periods of legal back-and-forth on the deal documents. That’s why having experienced advisers as part of your team matters. They act as a shield and guide, helping you stay focused on running your business, minimizing distractions and keeping the deal on track.

Deals can easily fall apart if the company performance starts to suffer when management gets buried in the weeds. Stay strategic, focus on the things that matter and get expert advice and support to help you.

Final thought

Getting approached by a potential buyer is exciting. But it’s not the finish line, it’s just the starting gun, and a carefully managed process will help deliver the best possible outcome.

If you’ve had inbound interest and want to understand your options or make sure you’re not leaving value on the table, get in touch.