It often begins with an unexpected phone call.
A buyer has been following your company. They know your industry, admire what you have built, and want to discuss an acquisition. A few conversations later, they put a number on the table.
For an owner who was not actively preparing to sell, the offer can feel compelling. It may be more money than you ever imagined receiving at one time. The buyer seems credible. The process sounds straightforward. You begin thinking about what life could look like after closing.
Then a second offer arrives, and the first one suddenly looks different.
The new offer may carry a higher valuation. It may require less rollover equity, include more cash at closing, or give you greater control over what happens to your employees and the company you built. Sometimes the second buyer simply understands your business better and sees value the first buyer missed.
The second offer is not automatically better because it came second. It is often better because the first offer was made without competition.
The First Offer Is Built for the Buyer
Most unsolicited offers are framed as opportunities for the seller.
The buyer may emphasize speed, confidentiality, and the ability to avoid a lengthy sale process. They may say they are prepared to pay a premium or suggest that involving an advisor will only add cost and complexity.
But sophisticated buyers do not make unsolicited offers because they want to overpay. They make them because acquiring a business outside a competitive process can be highly advantageous.
The buyer knows what similar companies have sold for. They know which deal terms are customary. They understand how working capital, rollover equity, earnouts, employment agreements, and other provisions can change the economics of a transaction.
Here’s a simple truth:
Most owners do not have the same information as sophisticated buyers.
Sellers may negotiate the largest transaction of their lives against a team that completes acquisitions regularly.
That asymmetry is one reason unsolicited offers deserve careful scrutiny.
In a recent episode of The Close M&A Podcast, Scott Bushkie, founder of Cornerstone International Alliance, shared a striking finding from the organization’s survey of lower-middle-market business owners:
Fifty-five percent of respondents said they would accept an unsolicited offer without first determining what the broader market might pay.
The risk is not simply accepting a low number. It is agreeing to terms without knowing which parts of the deal are negotiable.
The Second Offer Creates Context
One offer gives you a decision. Two offers give you information.
Once another qualified buyer enters the conversation, you can begin to see how the market actually views your company. If the valuations are far apart, you can investigate why. One buyer may place greater value on your customer base, geography, management team, or growth opportunities. Another may perceive risks that need to be addressed.
The comparison also exposes the difference between the headline price and the real value of an offer.
A buyer offering $40 million with a large earnout and significant rollover requirement may be less attractive than one offering $38 million with more cash at closing and fewer contingencies. The length of your transition period, treatment of employees, governance rights, restrictive covenants, and certainty of financing can all materially affect the outcome.
As Craig Castelli and David Strosnider discussed in their conversation about executive compensation and governance in M&A, the highest purchase price is not necessarily the best deal. Buyer sophistication, culture, employment expectations, and the seller’s post-closing role can matter just as much once the transaction becomes real.
A second offer makes those differences visible.
Competition Changes Buyer Behavior
The greatest advantage of multiple offers is not simply that you have alternatives. It is that buyers know you have alternatives.
When a buyer believes it has the only offer on the table, there may be little incentive to stretch on valuation or improve terms. When that buyer knows it must compete in a structured auction process, the conversation changes.
Deadlines become more meaningful. Buyers are encouraged to put forward their strongest proposals. Ambiguous terms must be clarified. A buyer that genuinely wants the company has to demonstrate that interest in writing.
This is why the process itself can have such a significant effect on value. The price someone receives for a company is often influenced by how many qualified buyers were involved and whether the sale created genuine competitive tension.
Read about the danger of the Friends & Family Valuation Trap.
Without that tension, the first offer may reflect what one buyer hopes to pay. A well-run process is designed to determine what the market is willing to pay.
The First Offer Can Still Be the Best
None of this means the first buyer should be dismissed.
The original buyer may ultimately provide the strongest combination of value, terms, cultural fit, and certainty to close. In some cases, the first offer is excellent. In others, it becomes excellent only after the buyer is given a reason to improve it.
The important distinction is this:
The seller selects the best offer after evaluating the market, not before.
Owners should also remember that receiving a strong letter of intent is only the beginning. Valuation can still be challenged during financial diligence, particularly if the buyer identifies issues with earnings or proposed adjustments. Understanding how a Quality of Earnings (QoE) review affects valuation can help sellers protect the leverage created during the bidding process.
Know What the Market Will Bear
The first offer can be exciting because it turns years of work into a tangible number. But it is still only one buyer’s view of the company.
The second offer creates perspective. It gives the owner a basis for comparison and gives both buyers a reason to compete. It may validate the first proposal, expose its weaknesses, or reveal possibilities the owner had never considered.
That is why the goal should not be to reject the first offer. It should be to understand whether it is truly the best one.
If you have received an unsolicited offer or are considering a sale, Caber Hill Advisors can help you evaluate the proposal, understand your buyer universe, and create a process designed to secure the right price and the right terms.
