Creating competition between buyers

A competitive sale process means running several serious buyers in parallel, instead of negotiating with whoever calls first. Competitors, investors and employees get the same information, at the same pace, under a confidentiality agreement. You keep control of the timeline, and it's the competition, not a single buyer, that sets the terms.

Why a single buyer costs you

Most owners sell the same way: a competitor or a client calls one day, a conversation starts, and a few months later they're negotiating alone with that person. Nothing dishonest about it. But when a buyer knows they're the only one at the table, they set the pace, the price and the terms.

They can ask for more of the price as an earn-out, a longer transition, broader warranties. And every time they find a problem during due diligence, they can lower their price without fear of losing the deal. Meanwhile, you've already told your family and maybe your managers that you're selling. Backing out gets hard.

With two or three serious buyers at the same time, the dynamic changes. Each one knows a better offer might exist. They have a reason to put a solid offer on the table early and to negotiate with more restraint.

The three kinds of buyers

Strategic buyers

Competitors, clients, suppliers or companies in a neighbouring industry. They buy to grow, enter a region or gain know-how. They know your market and sometimes see savings others don't. The flip side: they're also the ones you show the most sensitive information to. Confidentiality needs careful framing.

Financial buyers

Investment funds, holding companies and individual buyers backed by financing. They look mostly at the stability of profits and whether the team can run things without you. A business that's independent of its owner, with clear normalized EBITDA, speaks to them.

Employees

A management team or a group of employees can also make an offer. They know the business better than anyone, but often have less financing. Vendor financing is a common tool here. We compare this option in detail in selling your business to your employees.

All three can be in the same process. An employee offer can even serve as a serious floor against outside buyers.

The timeline: everyone at the same pace

The heart of a competitive process is the timeline. The goal is for offers to arrive at roughly the same time, so you can compare them. Here's a typical sequence, to adapt with your advisors:

1. The anonymous summary. One or two pages describing the business without naming it: industry, region, size, strengths.
2. The confidentiality agreement. Each interested buyer signs it before receiving anything more. Have your lawyer draft or review it: it should cover the information, solicitation of your employees and clients, and what happens if talks stop.
3. The presentation file. Built from your Transition Document, it gives enough information to make a preliminary offer.
4. Preliminary offers. One common deadline. You shortlist the best two or three, on price and on structure.
5. Meetings and data room access. Only for shortlisted buyers, in stages. The data room must be ready before you get here.
6. The letter of intent. You choose an offer and negotiate the letter of intent. Exclusivity is granted here, for a limited time.

For a share sale, this process is run with a registered dealer, who handles the securities side.

Keeping your leverage to the end

Leverage is mostly lost in three ways:

• Granting exclusivity too early. Until price and structure are specific enough, don't close the door on the others.
• Showing a gap during due diligence. Every surprise becomes an argument for a lower price. Hence the importance of preparing the sale two years ahead.
• Signalling that you're in a hurry. A seller who has to sell fast negotiates badly. Keep a credible reason you can afford to wait.

When a buyer calls first

That's often how it starts. Don't say no, but don't commit either. Thank them, say you're thinking about the company's future and will get back to them at the right time. Share no numbers and no documents before a confidentiality agreement. That call is good news: it tells you at least one buyer exists. It becomes one of the participants in your process, not the only one.

One call, three offers: a made-up case in Centre-du-Québec

One Tuesday morning, an Ontario competitor calls the owner of a Drummondville store-fixture maker (counters, display units, checkout furniture) and offers to buy. The company is made up: $12M in revenue, 70 employees, an owner aged 66.

Instead of negotiating alone, the owner takes three months to finish his data room. Then he opens a process: the Ontario competitor, a Quebec fund that invests in small manufacturers, and a group of three managers backed by vendor financing. All sign a confidentiality agreement. All receive the same file, with the same deadline.

The three offers arrive the same week. The competitor offers the highest price, but with a large earn-out. The fund offers a little less, almost all cash. The managers offer less, but keep the current team in place. The owner can now compare, and negotiate each offer in light of the others. This example is made up and promises no outcome; it shows the mechanism.

Your checklist this week

• Draw three columns on a sheet: strategic, financial, employees. Write at least three names in each: competitors, clients, suppliers, funds active in your industry, managers who could take over.
• Write your answer to a buyer's call, in two sentences, so you don't improvise when it comes.
• Rank your priorities before you see an offer: price, cash share, what happens to employees, how long your transition lasts.
• Ask your lawyer for a confidentiality agreement template, and what it will cover.
• Note what's missing from your data room and Transition Document: that's what sets the date you can open the process.

To go further, read structuring a win-win deal and step 8: sell at the right price.

Do it with a pro

Running three buyers in parallel on your own while running the business is a second full-time job, against people who negotiate often. With us, our regional partner and, for a share sale, a registered dealer, the process is prepared, paced and documented. See how selling your business works with us.

Sell my business in Quebec