Discover how to react should a prospective buyer enquire on the possible purchase of your business.

There are many occasions when an expression of interest is shown in a business by a ‘prospective' buyer.

This may be a flattering or daunting experience for the business owner and one that could absorb much management time.  It may be tempting to explore what value a third party places on your business, however, the downside is possibly sharing business secrets with someone who will not complete the purchase of your business, buy a competitor or manufacture the product themselves. In such circumstances it is important to ensure there are clear rules of engagement before discussions begin. 

A Non Disclosure Agreement should be signed but that may prove only to be a token gesture towards safeguarding your business secrets from an unscrupulous suitor.

As a consequence it is important to obtain information about the third party in order to assess their credentials and gauge the true level of interest they may have in your business.

Some basic information would include:

1. Name(s) Do you really know who you are talking to? 
2  Position(s) Are they acting on behalf of another party?
3. Addresses
4. References
5. Access to funds
6. Check the Balance Sheet
7. Ability to raise funds
8. Details of businesses they have acquired in the past
9. Has the suitor held discussions with your competitors regarding acquiring them
10. What is the suitor seeking to buy?
      - The whole business
      - Order book
      - A product etc.
11.What are the proposed terms of acquisition?
      - Cash
      -  Equity?
12.Will they seek to place restrictions on what work the business owner will be able to do in the future?

Receiving responses to these questions at an early stage will avoid much wasted time later and the disappointment of failing to sell your business after expectations had been raised.  In addition the confidential aspects of your business will be better safeguarded.