|How do you respond to someone who says they are interested in acquiring your business (especially a potential competitor) but won't make an offer until you share your financals and other confidential data? Do you ask them to make an offer without seeing the books first or share your data, hoping they make an offer, but realizing you're sharing confidential info? And how do you differentiate serious offers from time wasters who will chew all your time only to either not offer or low-ball after seeing your financial state? Can you get away with saying: "I'm not sharing you anything until you make an offer?" But then how can you obligate them to that?|
And what if they are adamant that they won't make an offer until they see your books and do due diligence? I would think that if investors can make a Term Sheet commitment contingent on due diligence, so can you do that with potential acquirers. But they don't seem to see it that way?
Here's some suggestions we've gotten, but I don't know what is common place or accepted:
* Tell potential acquirers that they must first submit a Contingent Offer providing your books substantiate certain minimum metrics.
* Tell potential acquirers that they have to pay for your time in doing due diligence, setting a flat rate (say, $20k for sake of argument), with the amount counting as a non-refundable deposit towards the acquisition amount
* Use a trusted third party to do a due diligence review, providing your information to the third-party who will not disclose it to the acquirer, but only verify certain required facts or due diligence requests. The Trusted third party inspects the books and doesn't disclose them to the acquirer but knows their desired metrics.
* Breakup fee that penalizes them for walking away.
* Confidentiality agreement with huge damages for disclosing any of the information outside a small group of people in the acquiring company.