Qualifying M&A Buyers (and Eliminating the Tire Kickers)

Finding prospective buyers represents only one part of selling a business. The more difficult task involves determining which buyers can actually complete a transaction. Every sale process can attract tire kickers. These prospective buyers express interest but lack the commitment, resources, or clear objectives required to close.

Some may simply want information about the company or industry. Others may have capital but remain uncertain about what they want to acquire. Another group may pursue numerous opportunities while waiting for an unusually favorable deal. Whatever their motivation, tire kickers may consume considerable time and management attention. More significantly, sellers may disclose sensitive information to parties that never represented credible buyers.

Identifying Serious Buyers

For these reasons, qualifying M&A buyers should begin early in the sale process. The objective is not to eliminate buyers unnecessarily. Instead, qualification helps determine which parties deserve additional information and management attention.

A serious buyer should understand why the company fits its acquisition strategy. The buyer should also possess the financial resources necessary to complete the transaction. Beyond those fundamentals, the M&A advisor should understand several aspects of the buyer’s acquisition plans:

• Acquisition Criteria: Does the company fit the buyer’s industry, size, geography, and investment parameters?
• Strategic Rationale: What specifically makes the company attractive to the buyer?
• Financial Capacity: Does the buyer have sufficient capital or realistic financing sources?
• Transaction Experience: Has the buyer successfully completed acquisitions before?
• Decision Process: Who makes the final acquisition decision?
• Timing: Does the buyer have a realistic timetable for completing the transaction?
• Potential Obstacles: What issues could prevent the buyer from closing?

Together, these questions provide a clearer picture of the buyer’s credibility and level of commitment.

Managing Access to Information

Once the advisor establishes initial credibility, the buyer can execute a confidentiality agreement. The buyer may then receive the Confidential Information Memorandum. Information should become more detailed as the buyer advances through the process. Sensitive customer, employee, pricing, and proprietary information may remain restricted until later.

This progression protects confidentiality while allowing serious buyers to conduct an informed evaluation.

Focusing on Buyers Who Can Close

Qualifying M&A buyers also strengthens the broader sale process. Management may focus its time on parties with genuine interest and sufficient resources. The advisor may then evaluate buyer feedback, compare indications of interest, and determine which parties should advance toward negotiations.

A large buyer list alone does not create a competitive marketplace. The quality and credibility of those buyers matter far more. Tire kickers will inevitably appear during some sale processes. A disciplined M&A advisor identifies them early and keeps the process focused on buyers capable of closing.