Help, someone wants to buy my agency

Last night you received another email offering to buy your agency. You've always ignored these approaches in the past. Dismissed them out of hand, deleted the mail instantly. But this time, you flagged it instead. It's nagging at you. Something's obviously changed in your own mind. But what should you do about it?

Agency owners get approached all the time by prospective buyers. I know, I used to be one of those buyers. But I'm not sure I ever resorted to cold emails. Nonetheless, that seems to be one of the ways it's done these days. Let's dig in by first exploring why one email is better than another email.

What I did instead of writing to strangers

When I was buying agencies, I never dreamed of deal origination by mail merge. That’s because I wasn't interested in buying just any old business, and besides, most of the agencies I wanted weren't for sale. Sending high volume emails or letters hoping to find a seller, any old seller, is a sign of a chancer in my opinion.

Instead, I worked with a professional originator who approached bigger agencies on my behalf, and I approached smaller ones myself. I did it through networking and referrals, not cold emails or letters because selling a business is a high-trust process, and mail merges don't earn trust.

Other deals in the sector being announced helped a lot. When an acquisition was publicised in our space, owners of similar agencies who had read the coverage started to wonder whether they too might be saleable. They became more open to a conversation and some would go and do their own research. In this way, our content: the announcements, blogs, and podcasts did a lot of our origination for us. The rest came through relationships, referrals and advisors who knew what we were looking for, which meant that by the time we approached an owner, we usually knew why that specific agency fitted our plan.

I'm sharing this with you so you know what genuine buyer interest looks like from the inside.

A mail merge and a personal email are both unsolicited emails. But a quality buyer will tell you why they think a conversation with you specifically makes sense. The email will be about the fit not false praise of your achievements. The former is worth your time, the latter is not.

Assuming you’re responding to the right kind, here’s how I recommend you deal with inbound enquiries.

First, decide where you stand

Before doing anything, I would recommend taking a step back. Think about what you would do after your agency is sold. This is making a very large assumption that (a) your agency is sellable at a price, in a structure and under terms you would accept, (b) that the buyer will see the same value you do, and (c) that they have the wherewithal to complete a deal.

But, assuming all those things are true, what do you want to do?

Would you want to stay on and carry on working in a larger organisation? Have you got other business itches you need to scratch? Is it time to take a step back and enjoy non work-related things? As the business owner, what you want should come first. I say should because sometimes the needs of the business come first. If, for example, the business is struggling to survive, the decisions are a little more existential and you may put your personal needs second. I’ve been here in the past myself.

Only you will know, but it’s important that you are clear in your own mind why you are taking this approach seriously when you’ve ignored all of the others.

Next, work out who has written to you

Apply the buyer's test from earlier. A buyer who wants your agency can name the capability, the client sector or the geography that makes you interesting, and it'll be accurate rather than flattery scraped from your website. An email built from adjectives, "impressive growth", "strong reputation", "businesses like yours", was written for a list, and you're just a name on it.

There's also another possibility, which is that the sender isn’t a buyer at all, but a broker hoping to sign you as a sell-side client. If they are posing as a buyer, my view is that this is pretty shoddy practice, but it does happen. When it does, you should ignore it. Brokers might well write to you. But they should be clear in their communication that they are either representing an existing client or that they have a pool of potential buyers who might be interested in you. In other words, they should be clear that they are an intermediary not the buyer themselves. Whether you choose to engage with them on this basis or not, is your choice. But, if they represent themselves properly, at least you can make an informed decision.

How should I respond without giving too much away?

I advise you to reply with a short, polite and inquisitive email with questions you need answering purely to validate the approach. Questions like: who do you represent, what are you trying to achieve with an acquisition, what have you acquired before, and why my agency? I never like to talk money up front. Many advisors will tell you to seek proof of funds, but it’s too early to do that in my opinion. You have no idea how they will fund a deal, but you’ll certainly need to ask later if you get that far.

It’s important that you concede nothing in the questions you ask. The way they answer the questions will help you decide whether to take it seriously. Principals with positive intent, strategic objectives and capital to close a deal tend to answer readily, while list-builders normally become vague or stop replying.

Hold your information back. Never send financials, don’t sign an NDA at this stage (that comes later) and don't confirm you're a seller. If they float a price or a multiple at you, take it with a pinch of salt. A figure mentioned this early is designed to start a conversation, it’s not a price anyone intends to pay.

Importantly, your fee income, client names and pipeline have value to a competitor whether or not a deal ever happens. It’s critical that you disclose nothing about your business until you have taken advice and signed a non-disclosure agreement. A line I'd suggest for the reply itself is this: "I'm not running a process, but I'll always hear a serious proposal." It keeps the door open without conceding your position.

Do I need to seek help?

Not to send that first reply, no. But if the answers come back, seem credible and the conversation starts to feel real then the answer is yes.

A single interested buyer negotiating with an unadvised founder holds nearly all the cards, because they do this for a living and you'll likely do it once.

The common answer given by brokers is that an advisor's job is to create the conditions of a competitive process even when one buyer is at the table, and to know which other buyers in the market should be brought to it. That might be partly true. Certainly, in more buoyant markets advisers like me would seek to bring other people into the process at the same time. But, whether there are other bidders or not, an advisor exists primarily to help you maximise value in the transaction. They will have done many of these types of deals so will be able to help you navigate it without taking your eye off your core business.

The right moment to get help is before you've shared anything you can't take back.

What should I do next?

If your answer to the first question was "possibly, within a few years", then the best response to this approach is preparation rather than negotiation.

Buyers who know what they want tend to move quickly when they find it. The owners who do well out of these conversations are the ones who were ready before the conversation started.

If you want to know where you stand, my Transaction Readiness Diagnostic will tell you. And if you'd rather talk a particular email through with someone who used to sit on the buyer's side of the table, you know where I am.