Your business just received an unsolicited acquisition offer.
The approach was professional. The valuation seems reasonable. The timeline feels urgent.
You should be suspicious.
A new breed of acquirer has emerged in the M&A market, and their business model depends on buying companies below market value. These aren’t traditional private equity firms or strategic buyers. They’re financial constructs designed around a simple premise: acquire businesses that generate profits to fund more acquisitions.
Think of it as a hot air balloon that needs constant fuel to stay airborne.
The Spreadsheet-Driven Acquisition Machine
These predatory acquirers operate with mechanical precision. Every deal flows through spreadsheets, not strategic vision.
Unlike private equity firms, they don’t invest in seasoned executives to improve acquired businesses post-acquisition. As performance declines, the imperative for more deals intensifies.
The M&A managers in these firms work like salespeople with quotas. They’re incentivised to push deals through quickly, creating artificial urgency that prevents you from asking the crucial question: Is this actually a good deal?
The speed becomes a weapon. From initial contact to sharing information to receiving an offer can happen in weeks, not months.
The Self-Funding Earn-Out Trap
Since these deals typically come in below market value, sellers often receive bridging earn-outs to make up the difference. The terms look reasonable on paper.
Here’s the trap: the earn-out is designed to be self-funding.
Growth targets are set so the profits generated exceed the earn-out reward. You’re essentially funding your own additional compensation through the business growth these acquirers will capture.
The terms are structured to be rarely achievable, despite appearing reasonable during negotiations.
Your First Line of Defence
Pause.
If your business has value today, it will have value in three months.
This isn’t emotion. This is business. These acquirers don’t disappear if your business is good and meets their requirements.
The pause breaks their momentum and returns control to you. During this time, you need to get prepared.
The Preparation Framework
Preparation prevents surprises when you reach the signing stage, after thousands have been spent on lawyers and hard choices must be made.
First, define what you want from a deal. What does success look like for you and your leadership team? What terms are non-negotiable?
Second, get professional valuation advice. Understanding your business’s true market value becomes your grounding factor throughout negotiations.
Third, critically assess your business. Identify anything that will drag valuation down and fix what you can in that three-month window.
Review contract terms carefully. Identify key risks, especially change of control clauses. Better to discover these now than after legal fees have mounted.
Conduct your own customer satisfaction survey. The buyer probably will, and surprises here can be deal killers.
Fourth, know your metrics cold. Revenue trends, customer acquisition costs, retention rates. These numbers will be scrutinised.
Creating Competitive Tension
A single conversation affords you virtually no negotiation leverage.
If your assessment looks positive, consider running a proper process or introducing one or two other buyers into the mix. This creates competitive tension that provides real leverage.
These discussions should remain confidential. You can mention other parties are interested without revealing specifics.
The predatory acquirer shouldn’t know you’re actively managing multiple conversations. Their experience advantage diminishes when they’re competing rather than controlling the process.
Avoiding Deal Fever
Deal fever is real. It clouds judgement and leads to poor decisions.
Understanding what you want and what isn’t good enough protects you from getting caught up in the excitement of negotiations.
Use this knowledge to drive up the price effectively. If the final terms don’t meet your criteria, walking away becomes a strategic choice, not an emotional reaction.
This doesn’t mean your business can’t be sold. It means the timing and buyers weren’t right this time.
The Power of Strategic Patience
The best deals happen when you’re prepared, not when you’re pressured.
Proper preparation and strong negotiation of the Letter of Intent should prevent you from going too far down the line with a deal that will ultimately fail.
These predatory acquirers rely on speed and information asymmetry. When you pause, prepare, and create competitive tension, you level the playing field.
Your business has value. Make sure you capture it.