What should you ask a buyer before opening your books?

Three things, in writing: the share of the capital targeted, the price range including its floor, and who decides, on what timetable. A serious buyer answers each in one line.

Is a confidentiality agreement enough to protect you?

It protects the information, not the time. A confidentiality agreement does not stop you spending weeks on a candidate who could not buy. Qualification happens before the agreement is signed, not instead of it.

Should you respond to every expression of interest?

Yes, but not in the same way. A short reply, together with the three questions, is enough at first. The accounts and the data room come later, for the candidates who have answered — and preferably within an organised process, with several candidates.

Qualifying a buyer before opening your books

An expression of interest is flattering. An SME owner approached by a buyer, a fund or a mandated adviser often responds quickly, and well: a presentation, financial statements, sometimes a site visit. They bring in their accountant, they talk to their partners, they devote hours taken from running the business. And they usually do so without asking the only question that matters: what does this buyer want to acquire, and with what means?

What a buyer who is not one actually costs

The cost is not that of refusing. Turning down an approach takes five minutes. The cost is that of the work: the weeks spent documenting the business for a candidate who, in the end, could not buy it — because they were after a minority stake rather than control, because their budget sat an order of magnitude below the price, because the decision was not theirs to make.

That time is not recovered. It was taken from running the company. It has sometimes exposed sensitive information to a player in the sector. And it leaves, among the partners and managers who were let into the secret, the impression of a failed project that weighs on the next transaction.

What costs an owner dearly is not turning a buyer down. It is spending weeks on one who was never a buyer.

A mandate that had never been written down

We have experienced this gap from the other side of the table. On a target-search mandate for an investor, we had worked for several months: summary profiles, tax filings, follow-ups with owners willing to reveal a little of themselves. The project went dormant, then restarted with a narrower focus. We then asked the initial questions again. The answers took one line each, and they changed the file: a stake rather than control, a price range whose floor sat ten times lower than what we had understood, a reduced sector scope.

Nobody had lied. The mandate had simply never been written down. That gap cost us little. It cost the owners who had been approached, and who had opened their books to a buyer that could not buy them.

Three questions to put in writing

Three questions are usually enough to sort the field. They are asked in writing, before a single document is sent, and the answers take one line each.

What share of the capital is targeted. Control, a majority, a minority? A buyer looking for a stake and an owner who wants to sell the whole company have nothing to discuss, however good the business.
What price range, floor included. Not a valuation — a range, with its bottom end. A candidate who cannot write it down has no budget yet. A candidate whose floor bears no relation to the business is not a buyer.
Who decides, and on what timetable. Does your contact commit the buyer, or pass the file to a committee? Is there financing to be raised, and from whom? A decision that depends on an unidentified third party is not a decision.

These questions are not distrust. They are sorting. A serious buyer answers them without difficulty: they settled them before writing to you. The one who takes offence or sidesteps them tells you just as much.

Requalify at every follow-up

An acquisition project is not fixed. It goes dormant, restarts, changes scope with the candidate's internal arbitrations, with financing obtained or lost, with another target that came along in the meantime. A buyer qualified six months ago is not necessarily one today. The three questions are therefore asked again at every renewed contact, especially after an interruption. They take a minute to ask, and they avoid restarting on an assumption that no longer exists.

What an adviser changes

This is one of the least visible roles of a sell-side adviser, and one of the most useful: asking these questions on your behalf, of every candidate, in the same way, and opening the data room only to those who have answered. The owner keeps their distance and their time. The buyer, for their part, understands that they are entering a process — which changes how they behave all the way to signing. The logical next step is to put the qualified candidates in competition: we described it in Should you run a competitive sale process?

An owner who has been approached is entitled to ask these questions before opening the books. It is not distrust. It is sorting.

For the full approach — preparation, qualification of candidates, negotiation, securing the handover — see our sale & succession service. And if the question arises on the buyer's side: LBO & buyouts.