A private equity firm approached us with an unsolicited off-market offer to buy our company. How do we evaluate whether accepting a proprietary deal or running a formal auction process yields a cleaner exit?

Question

Tyler Smith · Accepted Answer

Unsolicited offers feel flattering, but private equity firms pursue proprietary deals specifically to avoid paying market value. When there is no competing buyer in the room, the acquirer has zero incentive to offer their top multiple or concede on favorable deal terms. They will pitch you on deal certainty, speed, and avoiding banker fees, but they routinely make up for that perceived convenience by re-trading during confirmatory diligence.

A proprietary deal only makes sense under narrow conditions: the buyer offers an exceptional pre-emptive multiple, the cultural fit with your management team is uniquely aligned, and you negotiate an aggressive break-up fee or tight exclusivity windows. Even then, you must possess a rigorous, objective valuation benchmark based on recent comparable transactions in your specific industry.

In almost every other scenario, running a controlled, competitive auction process orchestrated by an experienced M&A advisor generates superior outcomes:
- Multiple competitive bids force acquirers to offer full enterprise value and limit aggressive earnout demands.
- Competitive pressure transfers leverage to you on non-price terms, such as indemnity caps, escrow holdbacks, and rollover equity structures.
- You establish a hard deadline for bids, preventing a single buyer from dragging out due diligence for six to twelve months while your operational focus deteriorates.

Never negotiate in a vacuum. The price an institutional buyer pays is directly proportional to their fear of losing the asset to a qualified competitor.