Received an Offer to Buy Your Business? What to Do Before You Respond

An unsolicited acquisition offer is simultaneously the best and most dangerous thing that can happen to a business owner. It is flattering, potentially life-changing, and full of traps for sellers who move too fast. The buyer who called you has done this before. You probably have not. This guide covers what to evaluate, what not to say, and the sequence of advisors to engage before you respond.

Who is calling you — and why it matters

Buyers who approach owners directly are almost always strategic acquirers (companies in your industry or an adjacent one) or financial buyers (private equity firms and their portfolio companies). Their motivations differ, and those differences shape how you should respond.

A strategic buyer wants your customers, team, technology, or market position. They can extract synergies — cost savings or revenue increases from combining the businesses — that no financial buyer can. Those synergies can justify paying a meaningful premium. But strategic buyers also run full due diligence on your competitive intelligence, and your customers, suppliers, and employees may learn about a sale before you want them to.

A financial buyer (PE firm) is buying cash flows and expects to sell again in 4–7 years. They are more likely to offer you a rollover equity arrangement — keeping you invested for a "second bite of the apple" — and less likely to combine your company with a competitor. PE buyers price acquisitions primarily off EBITDA multiples; strategic buyers may justify higher multiples from synergies.

See our strategic buyer vs. financial buyer comparison for a full breakdown of how deal mechanics, tax structure, and post-sale involvement differ.

Slow down: what counts as a binding commitment

Before you do anything else, understand one critical legal concept: the binding commitment rule. Several of the most powerful pre-sale tax strategies — particularly a Charitable Remainder Trust (CRT) contribution and a Donor Advised Fund (DAF) transfer — must happen before a binding sale is in place. Once a sale is effectively complete (an LOI with specific enough economic terms, or an agreement in principle), the IRS treats the owner as having sold first and then given away the proceeds, eliminating the tax benefit.¹

The practical implication: if you are considering charitable giving strategies, the window begins closing the moment you enter serious negotiations. A conversation with a CRT or DAF specialist should happen before any LOI — ideally in the first two weeks after you receive an offer.

Similarly, pre-sale estate planning strategies — GRATs, IDGTs, and direct gifting — work best before the sale value is crystallized. Once a buyer has named a price and you are in active negotiations, the IRS can argue that transferred shares already reflect the pending sale value, which significantly reduces the planning benefit.

Is the offer fair? A quick valuation sanity check

Before evaluating any offer, get an independent read on your business's value. Most buyers open below market — that is a negotiating tactic, not a statement of what the company is worth. The right starting point is your own value estimate, based on normalized EBITDA or seller's discretionary earnings (SDE) and applicable industry multiples.

See our business valuation guide for methodology. Key inputs:

• Normalized EBITDA or SDE: adjusted for owner compensation to market rate, one-time expenses, personal items run through the business, and non-recurring revenue. Buyers will normalize this themselves; you should know the number first.
• Industry multiple: EBITDA multiples vary significantly by sector. Software businesses often transact at 4–8×; manufacturing at 4–6×; professional services at 3–5×; distribution at 4–5×. These ranges shift with interest rates and M&A market conditions.
• Quality-of-earnings factors: customer concentration, revenue predictability, owner-dependency, and management depth all affect where in the range your business lands. A business where 40% of revenue comes from one customer will trade at a discount regardless of EBITDA.

Our business valuation calculator can give you a starting range. A formal valuation from your financial advisor will give you a defensible number to anchor negotiations.

A buyer's first number is rarely their best number. If the initial offer is significantly below what a disciplined valuation process would generate, the right response is not rejection — it is "we appreciate the interest; let us consider it."

The single most important decision: run a competitive process?

The most financially consequential decision you will make is whether to negotiate exclusively with this buyer or use the offer as a starting point to run a competitive process.

Running a process — hiring an M&A advisor, creating a confidential information memorandum (CIM), and contacting a targeted list of qualified buyers — typically produces higher offers than one-on-one negotiation with a single buyer who approached you. When multiple qualified buyers are bidding simultaneously, each is incentivized to price at the upper end of their range. The trade-offs:

A middle path is the stalking horse with go-shop approach: negotiate an LOI with the unsolicited buyer, but reserve a 30–45 day go-shop period during which your advisor contacts a targeted list of buyers. If a better offer emerges, you can accept it (subject to a break fee to the original buyer, typically 1–3% of deal value). Some LOIs restrict go-shops entirely — this is a key negotiating point before you sign.

Tax structure: asset sale vs. stock sale — and why this conversation happens now

Many buyers who approach you directly will default to proposing an asset sale. This benefits the buyer: in an asset sale, they acquire a stepped-up tax basis in all acquired assets, generating significant depreciation deductions over the following 15 years. The present-value benefit to the buyer of an asset deal over a stock deal can exceed 15–20% of the purchase price.

For you as the seller, that cost shows up in higher ordinary income taxes. In an asset sale, you pay ordinary income rates (up to 37%) on depreciation recapture and non-compete payments, whereas a stock sale converts most of those proceeds to long-term capital gains (23.8% federal including NIIT).² The structure premium — the extra price you should demand to agree to an asset sale — should offset this tax difference.

See our asset sale vs. stock sale guide and calculator for the full math. Key points for the early negotiation:

• If you own C-corp stock with QSBS eligibility (Section 1202), do not agree to an asset sale or a §338(h)(10) election — these eliminate the $15M+ exclusion that could make most of your capital gains tax-free.³
• S-corp and LLC sellers face different math. Because the entity already avoids double taxation, a §338(h)(10) election may be closer to neutral or even favorable, depending on your asset mix and basis.
• The Form 8594 allocation of purchase price across asset classes matters in asset sales — buyers and sellers have opposite incentives on goodwill vs. non-compete classification, and your allocation position should be established early.

The entity and tax structure question should be analyzed before you respond to the buyer's framework. Once you have verbally agreed to a deal structure, it is very difficult to reopen.

The advisors you need — and in what order

When you receive an unsolicited offer, the natural instinct is to call your M&A attorney or investment banker. That is often not the right first call.

1. Fee-only financial advisor specializing in business exits (first). Before you know whether to accept, reject, or run a process, you need to understand your after-tax net. An exit-planning specialist can model asset vs. stock sale, QSBS eligibility, installment sale options, charitable giving strategies, and estate planning windows — all in the context of your specific deal. They have no incentive to push you toward a transaction. They are paid the same whether you sell or not.
2. M&A advisor or investment banker (second). Once you know your target after-tax outcome and whether a competitive process makes sense, bring in a transaction advisor to run the process. See our guide to choosing a transaction advisor.
3. M&A attorney (in parallel with #2). Your attorney protects your representations and warranties, negotiates the definitive agreement, and reviews the LOI. Engage them once you decide to move forward.

Protecting confidentiality before you share anything

Before sharing any financial information with an interested buyer, require a signed non-disclosure agreement (NDA). A buyer's opening outreach does not grant them access to your revenue, EBITDA, customer list, or employee data.

The NDA should specify:

• What is covered: all non-public business information — financials, customer relationships, personnel, technology, and the fact that a potential transaction is being discussed.
• Non-solicitation of employees: prohibit the buyer from recruiting your team during and for 12–24 months after the process, even if no deal closes.
• Non-solicitation of customers: prohibit direct customer outreach.
• Return or destruction of materials: if the deal does not close, require return or certified destruction of all provided information.
• Restricted distribution: limit who at the buyer's organization can see the information — deal team and advisors only.

Employees who learn about a potential sale may update their resumes. Key customers may slow-walk renewals. Competitors may use the news in their own sales pitches. Confidentiality during a sale process is not just a legal nicety — it is a business continuity issue.

The QSBS timing issue: when an unsolicited offer is a clock problem

If you own C-corp stock, QSBS eligibility under Section 1202 can exclude up to $15M of capital gains from federal tax — potentially more with stacking strategies. The key requirement is a 5-year holding period from the later of the date you acquired the stock or the date your company's gross assets first dropped below the original issuance threshold.³

Under the post-OBBBA tiered structure, a 4-year holder excludes 75% of gain; a 5-year holder excludes 100%. On a $10M deal, the difference between selling at year 4 vs. year 5 can be over $350,000 in federal tax. If you are 3.5 years into your holding period and a buyer is proposing a close in 6 months, you face a real decision: close now and pay tax you could have avoided, or negotiate a delay and risk the buyer walking.

Knowing your exact QSBS position — date of issuance, gross assets at issuance, any disqualifying events — is not optional. It may be the most important number in your deal economics, and it should be confirmed before you enter any negotiation timeline.

Common mistakes sellers make when approached directly

• Anchoring on price too early. If you say "I'd consider selling for $12M" before the buyer has named a number, you have capped the offer. Let them go first.
• Agreeing to exclusivity before the terms are firm. A buyer who gets 60 days of exclusivity at an early stage has 60 days to find problems, negotiate you down, and create closing anxiety. Exclusivity should begin only after a fully negotiated LOI.
• Signing the LOI without understanding tax structure implications. Many sellers sign LOIs without realizing they have implicitly agreed to an asset sale framework or a purchase price allocation that will cost hundreds of thousands in unnecessary taxes.
• Skipping the financial advisor before LOI. The pre-LOI window is when QSBS qualification can be confirmed, CRT/DAF contributions can be structured, and estate planning windows can be seized. After the LOI, you are in exclusivity and under time pressure — these strategies become much harder to execute.
• Underestimating due diligence preparation time. A buyer who approached you proactively may move fast once you agree to proceed. Disorganized data rooms slow deals and give buyers negotiating leverage. Clean financial records, organized legal documents, and a customer contract inventory should be ready before the data room request arrives.
• Treating the first offer as the final offer. A business with clean financials, a documented valuation rationale, and at least one alternative buyer will almost always negotiate a better outcome than a business that accepts the first offer from the first buyer who calls.

Your 30-day action plan after receiving an unsolicited offer

Putting it together: the financial planning view the buyer does not share

A buyer's offer letter shows you a purchase price. It does not show you what you will net after federal capital gains tax, NIIT, state income tax, depreciation recapture, M&A advisory fees, or escrow holdbacks. It does not show you whether your QSBS clock is running, whether a CRT contribution could save $400K in taxes before closing, or whether moving to a no-income-tax state 18 months before closing is worth the disruption.

The full picture — after-tax proceeds, retirement sustainability, estate plan interaction, charitable giving optimization — is what a fee-only financial advisor specializing in business exits builds. Most owners who receive unsolicited offers contact them weeks or months too late, after the LOI is signed and the planning windows are closed. The advisors in our network specialize in exactly this situation: an owner who has received an offer and needs to understand what it really means before they respond.

Sources

1. Rev. Rul. 78-197 — binding commitment rule governing timing of charitable contributions in relation to a business sale. Contribution to a CRT or DAF must precede a binding sale commitment to avoid constructive receipt treatment. See also Ferguson v. Commissioner (1999) and Blake v. Commissioner for case law refining the "practically certain to close" standard.
2. IRS Rev. Proc. 2025-32 — 2026 long-term capital gains rates (0/15/20%) and NIIT threshold under §1411(b) ($200K single / $250K MFJ). Combined federal rate for high-income taxpayers: 20% LTCG + 3.8% NIIT = 23.8%. Ordinary income top rate: 37% under IRC §1.
3. IRC §1202 as amended by the One Big Beautiful Bill Act (OBBBA, July 2025) — QSBS exclusion up to $15M per taxpayer per issuer; tiered exclusion 50/75/100% at 3/4/5-year holding period; gross assets threshold at issuance increased to $75M for post-OBBBA stock. A §338(h)(10) election or asset sale structure eliminates §1202 eligibility because the transaction is not treated as a sale of stock.
4. Business sale M&A advisory fee ranges per Firmex and Axial M&A market surveys. Lehman and Double Lehman fee structures for sub-$25M transactions; typical all-in M&A advisory fee 4–6% of deal value for $5M–$25M transactions. See also our business sale transaction costs guide.
5. IRC §453(i) — §1245 recapture income recognized in the year of sale regardless of installment election; only gain in excess of recapture can be deferred across installment periods. Relevant when evaluating asset sale structure in conjunction with installment sale deferral.

Tax values verified as of June 2026. IRC references current through OBBBA (July 2025) and SECURE 2.0 (2022). This guide describes general principles; your specific transaction may involve different tax treatment depending on entity type, holding period, and deal structure. Consult a qualified tax and legal advisor before taking any action in response to an acquisition approach.