Bruce Werner, an expert in governance, strategy, finance, and M&A, specializes in helping owners understand the different types of bids when it comes to selling their businesses. The three types of bids are solicited, unsolicited, and pre-emptive. Solicited bids are received when a seller has purposely marketed their business for sale, usually through a banking process or private sale. These bids typically come after four to six weeks of marketing preparation. Unsolicited bids, on the other hand, are unexpected offers that come from private equity firms or investment banks cold calling potential sellers.
In a recent situation, a third-generation owner received an unsolicited $75 million offer for his business, which he had never considered selling before. With the help of Bruce Werner, the owner spent four months evaluating his options and ultimately decided to sell after realizing the risks involved in keeping the business with limited knowledge of certain industry issues. Ultimately, the sale proved to be the right decision when the owner’s largest customer moved their business to Asia months later.
Pre-emptive bids occur during an auction process when a buyer wants to offer a premium to take the property off the market and limit competition. Bruce Werner shared a personal experience of deciding not to accept a pre-emptive bid for his family business due to undesirable non-economic terms. Instead, they chose to run a full process and ended up with a better outcome when the deal closed with another buyer. In another situation, Bruce is working to generate a pre-emptive bid for an 80-year-old owner looking to sell his family business in the auto industry due to emotional and health reasons.
Before taking a business to market, it is essential to define a successful outcome in terms of price, terms and conditions, and representations and warranties. Understanding these factors beforehand can make it easier to deal with any type of bid that may come your way. It is important to go through a thorough thought process before accepting or rejecting an offer, as unsolicited bids can throw owners off track while they figure out their goals and processes.
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