A buyer approached me about my business. What now?

Record the approach before reacting to the number.

Keep the original message and make a factual note of who contacted you, whom they represent and what they asked for. Verify the person and organization using independently obtained contact details. Ask whether they intend to acquire directly, represent another buyer or introduce opportunities to others.

Write down the ownership interest or assets they want, the proposed role for you and whether their indication assumes debt, cash or property is included. If there is no written proposal, mark those points as unanswered rather than filling the gaps with assumptions.

Test buyer fit with questions you can follow up.

Ask who makes the investment decision, how the purchase would be funded and what approvals or financing remain. Request an explanation appropriate to the stage; an unsupported statement that funds are available is not the same as evidence that this transaction can close.

Explore their operating plan: management continuity, locations, customers, staff and your intended handover. Treat past acquisition claims as claims to verify. You do not need to decide that a buyer is suitable simply because its first price sounds attractive.

• Who is the actual acquiring entity?
• What remains conditional, and who can remove each condition?
• What would the buyer need from you before it can make a meaningful proposal?
• Are there conflicts if the buyer is a competitor, customer or supplier?

Set the next disclosure boundary.

Prepare a short, non-identifying overview and agree who can receive it. Before sharing sensitive information, have counsel review the proposed confidentiality terms and the purpose for which information can be used. For a competitor, discuss whether an independent adviser should review commercially sensitive material.

BDC describes confidentiality agreements and letters of intent as documents that frame the acquisition discussion. Ask your lawyer which provisions could bind you, particularly exclusivity, confidentiality, costs and dispute terms. Do not assume a document is harmless because it is called preliminary.

• Use a staged confidentiality plan

Choose deliberately: investigate, prepare or pause.

You can request a clearer proposal, organize missing records, compare an approach with your objectives or decline to proceed. Set a decision date and identify the evidence needed by then. Avoid negotiating against a deadline you have not understood.

If exclusivity is proposed, assess the requested period, milestones and consequences with your advisers before agreeing. Keep running the business while discussions continue. A buyer's diligence process should not become an uncontrolled route to staff, customers or proprietary information.

• Compare a proposal beyond its headline price
• Return to the Canada seller guide