If a competitor or private equity firm approaches us with an unsolicited letter of intent before we have formally started our exit runway, what immediate operational steps should we take?

Question

Tyler Smith · Accepted Answer

An unsolicited Letter of Intent (LOI) is flattering, but accepting an inbound offer without market preparation almost always results in leaving enterprise value behind. Buyers look for proprietary, off-market deals specifically because they can negotiate favorable terms without competing against other bidders. If you receive an unsolicited offer before completing your exit runway, you must respond with operational discipline rather than excitement.

First, do not sign anything containing an exclusivity clause. Exclusivity strips away all your negotiating leverage, allowing the buyer sixty to ninety days to comb through your business and re-trade the price downward once you are emotionally committed to selling.

Second, benchmark the offer against your long-term plan in your V/TO. Does the valuation and deal structure meet your post-exit financial needs, or does it require you to work a three-year earnout under someone else's leadership? If your operational systems, financial reporting, and leadership seats are not fully institutionalized, you will face severe valuation discounts during diligence.

Take these concrete steps:

- Engage a qualified M&A attorney and transaction advisor to review the terms without signing exclusivity.
- Use the inbound offer as a catalyst to perform an honest internal exit readiness audit.
- Determine whether running a competitive process with multiple qualified buyers would yield a substantially higher valuation.

Treating an unsolicited approach as a market data point rather than an immediate transaction preserves your options and keeps you in control of your exit timeline.