Running a competitive sale process is one of the most powerful tools a business owner can use when exiting their business.
We are frequently approached by business owners who have entered direct discussions with a single party, only to find the process becoming protracted, one‑sided, and lacking momentum. This approach can consume time, resources, and energy with one party exerting disproportionate influence over the pace and direction of the deal.
Introducing competitive tension where multiple investors are actively pursuing the opportunity fundamentally changes the dynamic and shifts the balance of power back to the seller. When executed correctly a competitive process creates urgency, supports stronger pricing outcomes, and delivers more favourable commercial terms.
We recently ran a sale process for a client that clearly demonstrates the impact of competition.
When the business was taken to market, more than 50 enquiries were received from our database shortly after launch.
One prospective investor moved quickly and submitted an offer that was below our expectations. Their strategy appeared to be to progress rapidly, engage in ongoing negotiations, and gradually erode value until a deal was reached.
However, once another party submitted an offer, competitive tension was immediately established and the dynamic shifted. Additional offers followed further strengthening our client’s negotiating position.
The presence of competition not only increased the headline price but also drove a more rigorous assessment of deal terms and conditions. After several exchanges, the initial bidder more than doubled their original offer and materially reduced the number of conditions attached.
The result was that the seller had a genuine choice and could select the buyer and proposal that best aligned with their desired outcome.
The following steps are critical to running a successful competitive sale process.
Be Well Prepared
A well-constructed Information Memorandum (IM) that presents high‑quality information is essential. Strong preparation streamlines buyer assessment, builds credibility and accelerates decision‑making.
Execute Extensive Marketing
A clear and deliberate marketing strategy is critical. A well designed approach should target strategic buyers, private equity, industry players, private investors, and international interest where relevant. .Reaching a number of serious contenders maximises competition.
Structure the Offer Process
Prospective investors should be guided through a structured and transparent process:
- Phase 1: Receive all non‑binding indicative offers.
- Phase 2: Engage in fair and transparent negotiations maintaining clear communication and keeping multiple bidders engaged and aware of competition. This is where competitive tension does its work.
- Phase 3: Evaluate offers strategically, considering not only valuation but also deal structure, conditions, reputation, execution certainty, and strategic fit. A scoring matrix can be useful to compare offers on a like-for-like basis and reduce decision risk.
Select the Preferred Buyer and Close Quickly
Once a preferred bidder is selected:
- Grant exclusivity only after key commercial terms are agreed.
- Maintain momentum through to signing and completion.
Running a competitive process is ultimately about creating optionality, managing psychology, and executing with discipline. When done well, it doesn’t just achieve a sale; it delivers the strongest possible outcome and ensures that value is not left on the table.
Author: DMA M&A Advisor Michael Yarad
