Short answer: Before sharing sensitive information, ask why the buyer wants your company, who approves the deal, how it will be financed, and what could prevent closing. Let the answers determine how much access to give and whether to consider exclusivity.

This often starts with a flattering message: a strategic buyer, investor, search fund, or competitor says it is interested in acquiring your company. It can feel like validation. It may lead to a credible sale, but it may also begin a long process before the buyer has established its rationale, authority, funding, or ability to close.

Use the first conversations as mutual diligence. The buyer is assessing your company. You are assessing whether the buyer deserves confidential information, management time, and negotiating leverage.

An approach is not an offer

Early interest can come from a strategic acquirer, private equity firm, search fund, investor, competitor, or individual buyer. The message may be specific, or it may simply say that the buyer is interested in companies like yours.

Do not assume that interest means the buyer has agreed a valuation, secured financing, obtained internal approval, or considered the work required to close. A buyer may be genuinely ready to acquire. It may also be benchmarking the market, learning about a competitor, testing valuation expectations, building a thesis for later, or looking for leverage before making a low offer. Slow the process enough to understand the buyer before sharing customer names, employee details, contracts, source code, detailed margins, or lender materials.

Eight-question scorecard

This scorecard is a first screen. A credible answer does not guarantee a transaction, and a warning sign does not always end the conversation. It should determine the next question and the next level of access.

Question Credible answer Warning sign
1. Why this business now? Specific fit and timing. Generic interest or changing rationale.
2. Who sponsors and approves the deal? Named sponsor, decision makers, and approvals. Unknown approvers or late stakeholders.
3. How would you finance it? Clear sources, amounts, and conditions. Financing is deferred or unexplained.
4. What have you acquired before? Relevant examples and honest lessons. No evidence or every deal was "seamless."
5. What information do you need? Staged, decision-linked requests. Sensitive data requested before an offer.
6. What structure are you considering? Clear form, consideration, and conditions. Headline price without structure.
7. What happens after closing? Named plan for people, customers, and brand. No owner or plan for integration.
8. What could stop closing? Specific risks and mitigation steps. Claims that nothing could go wrong.

1. Why are you interested in this business now?

Start with the reason for the approach. A serious acquirer should be able to explain why your company matters to its strategy and why it is acting now.

Listen for: a specific connection to market expansion, product capability, customer access, distribution, technology, talent, margin improvement, supply-chain control, or platform growth. The buyer should be able to identify which parts of the company are most important and what success would look like after closing.

Be careful if: the answer stays at sector level, changes between meetings, centers on collecting market information, or treats removing a competitor as the entire rationale.

Ask why the buyer wants to acquire rather than build or partner, why the transaction is a priority now, and what must be true three years after closing for the acquisition to be successful. Alehar's guide to strategic and financial buyers in M&A transactions explains how buyer motives and decision processes can differ.

2. Who is sponsoring the deal and who approves it?

The person who made contact may not have authority to agree terms or close. Ask who owns the acquisition thesis, who will run the process, who approves valuation and structure, and which other approvals may be required.

The path may include a CEO, CFO, business-unit leader, board, investment committee, shareholders, lenders, or regulators. For a financial sponsor, ask whether the fund has approved the investment thesis or is still exploring it. Ask when each decision will be made and what information the decision makers need.

In the United States, some transactions may require premerger notification under the HSR Act. The FTC premerger notification program explains the process and the waiting-period requirement. Whether it applies depends on the transaction and current rules, so ask counsel to assess it rather than accepting a buyer's assurance that approval is a formality.

Be careful if: the buyer seeks exclusivity before naming decision makers, cannot describe its approval path, or introduces material new stakeholders late in the process.

3. How would you finance the acquisition?

A headline price is not a funded offer. Ask whether the buyer expects to use balance-sheet cash, existing debt capacity, new debt, new equity, seller financing, a seller note, an earnout, rollover equity, or a combination.

Buyer type What to ask What to watch
Strategic acquirer Is the purchase funded from available cash or debt capacity, or does it require a new financing process? The team supports the deal but has not secured budget or executive approval.
Private equity or financial sponsor Has the investment committee approved the thesis, and what lender or equity commitments remain? The sponsor needs material financing or committee approval before making a firm offer.
Search fund or individual buyer Who are the equity backers, lenders, and guarantors, and what conditions remain? The buyer is interested but does not control the capital required to close.

A buyer may have a credible plan before every commitment is signed. If funding is still conditional, keep diligence staged and ask what evidence will be available before exclusivity. The amount payable at closing also matters: deferred consideration, seller notes, earnouts, and rollover equity leave the seller exposed to different risks.

4. What have you acquired before, and what happened after closing?

Past behavior is useful evidence. Ask whether the buyer has completed acquisitions of similar size, in comparable markets, or with similar integration demands. Then ask what happened after closing.

Listen for: a relevant example, a clear role for the integration team, candid lessons, and an explanation of what the buyer would do differently. A first-time buyer can still be credible, but it should recognize the gaps in its experience and bring in appropriate financial, legal, tax, and operational support.

Be careful if: the buyer cannot explain prior outcomes, describes integration casually, avoids references, or says every acquisition went exactly to plan.

5. What information do you need before making an offer?

This question separates a decision-led diligence request from general information gathering. Ask what the buyer needs for an initial indication, what it needs for a letter of intent, and what belongs in confirmatory diligence.

Early materials should let the buyer understand the company, test strategic fit, and form a valuation view. Customer names, employee compensation, source code, supplier terms, board materials, detailed contracts, and other sensitive records usually belong later, under appropriate confidentiality and access controls.

A practical sequence is:

  1. Introductory call and non-disclosure agreement.
  2. Teaser or short company overview.
  3. Information memorandum or management presentation.
  4. Initial valuation indication or non-binding offer.
  5. Letter of intent covering structure, exclusivity, and the diligence plan.
  6. Controlled data-room access for confirmatory diligence.

The exact sequence can vary, but access should expand as the buyer demonstrates seriousness. Use the M&A information memorandum checklist and seller diligence checklist to prepare consistent materials. The guide to red flags in due diligence identifies issues that can weaken confidence or reopen terms if found late.

6. What deal structure are you considering?

Ask whether the buyer is considering an asset purchase, share purchase, merger, partial acquisition, majority recapitalization, phased acquisition, earnout, rollover equity, seller note, or management incentive plan.

Structure affects tax treatment, risk allocation, control, employee continuity, working-capital mechanics, closing conditions, and what the seller receives at closing and later. A valuation cannot be assessed properly without the form and timing of consideration.

Be careful if: the buyer avoids structure until late, uses an earnout without clear measures and control rights, asks the seller to finance a material part of the transaction before showing its own funding certainty, or shifts substantial downside back to the seller.

Compare the proposed terms with the guide to typical terms in an M&A term sheet. If the owner is considering retaining an interest, the guide to preparing for a partial or full sale explains how the decision changes the seller's continuing exposure.

7. What would happen to employees, customers, product, and brand?

Understand the buyer's intentions before signing. Ask whether the company will operate independently or be integrated, who will lead the work, which leaders are expected to stay, how customers will be informed, and whether the brand and product will continue.

These answers can change the seller's view of an offer. Headline value must be considered alongside employee disruption, customer risk, founder obligations, reputation, and the buyer's ability to execute its plan.

Listen for: a named integration leader, a practical retention plan, a customer communication plan, a defined founder role, and a clear account of what will change.

The article on non-financial considerations in M&A covers the people, culture, customer, and reputation issues that may need to be weighed alongside price.

8. What could stop you from closing?

Ask this directly. A credible buyer should be able to identify the assumptions and conditions that could change value, delay closing, or cause it to withdraw.

Possible issues include financing, internal approval, customer concentration, quality of earnings, legal exposure, key-person risk, competition review, culture fit, integration concerns, or a diligence finding that changes the acquisition thesis. Ask which findings would change valuation, which approvals remain, and where the buyer's previous processes have broken down.

The DOJ and FTC's 2023 Merger Guidelines describe frameworks the agencies may use when reviewing mergers and acquisitions. The guidelines are not binding law, and regulatory risk depends on the facts and jurisdiction. Ask counsel to assess the transaction rather than drawing a conclusion from the guidelines alone.

Be careful if: the buyer says nothing could prevent closing, will not identify assumptions behind its offer, or treats unresolved financing, approvals, or regulatory questions as administrative details.

How to respond if the buyer is vague

Vagueness is not always a reason to end the conversation. Early interest can be legitimate. The practical question is how much information and negotiating leverage to provide before the buyer gives a more complete answer.

If the buyer says A practical response
"We are still forming our view." Share a high-level overview and ask what would allow an initial valuation view. Hold back sensitive diligence.
"We need more information before giving a price." Ask which information changes value and whether the buyer can provide a range or valuation framework first.
"We need exclusivity to proceed." Ask for valuation, structure, financing, approval status, diligence scope, and timing before considering exclusivity.
"Approvals should be straightforward." Ask who approves, when they decide, what materials they require, and what has already been approved.

Keep momentum, but link each increase in access to a decision the buyer is prepared to make.

What to confirm before giving exclusivity

Exclusivity removes competitive pressure and limits the seller's options. Before agreeing to it, try to have:

  • A clear valuation range or signed letter of intent.
  • A defined structure and the main economic terms.
  • Evidence of financing or funding capacity.
  • Named decision makers and a clear approval path.
  • A specific diligence request list.
  • A realistic signing and closing timetable.
  • Confidentiality protections and information-sharing rules.
  • An understanding of the buyer's main closing risks.

The appropriate terms and duration depend on the transaction. Ask counsel to review the exclusivity provisions and any permitted exceptions before signing.

Keep control of the sale process

Good answers do not eliminate deal risk. They let the seller decide whether to continue, what to disclose next, and when the buyer has earned exclusivity. The guide to the sell-side M&A process explains the broader sequence, while the article on M&A term-sheet terms helps owners compare more than headline value.

Alehar supports founders, owners, and management teams through Selling your Company. If an acquirer has approached your mid-sized company or you are preparing for a sale, contact Alehar.

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