Back to all TOPICS

Creating a Competitive Process

Creating competition among buyers helps capture the full value of what you've built.

When buyers compete, you win.

Many founders confuse coordinating inbound interest with running a competitive process. Even if you have multiple buyers reaching out, there is no guarantee these represent the best buyers or that they will actually close. True competition means engaging the entire market—potentially hundreds of qualified buyers—not just the few who happen to find you.

What Real Competition Looks Like

A genuinely competitive M&A process involves several critical elements that most founders don't fully appreciate:

  • Market Coverage: Engaging systematically with many parties beyond just those who reach out to you. High-quality companies are scarce; capital is not. When buyers compete for scarce assets, sellers win.
  • Buyer Assessment: Evaluating each buyer's ability to "win" based on their historical acquisition track record, access to financial resources, and strategic fit with your business.
  • Process Structure: Designing the deal process specifically to encourage competition, leverage differing valuations, and assess buyer commitment based on their participation.
  • Timeline Control: They say "time kills all deals." Keeping the process moving quickly maintains buyer urgency and lowers the chances of a deal falling through due to changing buyer priorities, operational headwinds, market downturns or even key people from the buyer moving on.

The Power of Competitive Tension

Buyers benefit enormously from lack of competition in the buying process—which is exactly why they will often pressure you to work exclusively with them. They understand supply and demand dynamics because most are serial acquirers who purchase multiple companies per year. You, as a founder, likely go through this process only once or twice in your lifetime.

On the other hand, we regularly see buyers in competitive processes improve their offers materially—increases that would not happen in a non-competitive environment.

Beyond Valuation: Structure and Terms

Competition impacts more than just price. It also drives better transaction structure, including:

  • Reduced Earnouts: In competitive processes, you have leverage to minimize or eliminate risky earnout provisions that are rarely paid out and create misalignment with buyers.
  • More Cash at Close: Competition allows you to demand cleaner purchase structures with more upfront cash rather than deferred payments or non-cash consideration.
  • Better Legal Terms: When buyers compete, they can't stuff unfavorable legal terms into the purchase agreement at the last minute—you have alternatives.

Next Topic

05Navigating Due Diligence

Due diligence is the pivotal moment when buyers put your company under the microscope. It is infinitely more painful if you are unprepared and, if done poorly, it can lead to the finish line being moved or disappearing completely.

Read more
View all topics
Get in touch

If you would like to speak to someone, get in touch by using our contact form.

Project Image