Goering Center for Family and Private Business

Member Newsletter Submission from First Financial Bank

March 27, 2025

Broad Auctions & Navigating Inbound Offers on Your Business

Business owners frequently receive inbound inquiries from private equity (“PE”) or PE owned firms trying to introduce themselves. There are thousands of PE firms in the United States and all of them are in the business of buying companies for the best possible price, which is typically achieved through sourcing “off-market” deals. These are deals where sellers have not hired an investment banking firm to help market their company. Off-market deals are extremely attractive because many sellers are inexperienced and ill-equipped to negotiate a deal that is representative of market price and/or terms, which could potentially result in sellers taking more risk and losing out on economic value.

When business owners hire an experienced team around them, they can better understand what possible outcomes exist in the market and avoid falling prey to the many negotiating tactics of buyers. We firmly believe that a broad, competitive process with strong execution is what drives the most value for a seller.

Consider just a few of the ways in which investment banking teams can provide value.

1. The Option of Going to Market – Even if a seller only wants to explore a small number of offers or has no intention of executing a broad auction, hiring an investment bank and preparing to go to market is often enough to get inbound buyers to revisit their valuation or terms. Broad actions can have risks, such as an extended deal timeline or more burden on management, and may not result in a higher offer.
2. Managing the Process – Executing a sale is a full-time job. Running your business while negotiating and managing the extensive due diligence process can be extremely difficult and lead to one of those processes falling through.
3. Understanding the Data and Framing the Picture – Most private equity firms rely on hard data to support their investment thesis in a company. Having an experienced advisor that can understand complex data sets can help frame a business in the most positive light through data.
4. Structuring the Transaction – Transactions can be structured in many ways (stock vs. asset, earnout, seller note, rollover equity, etc.). Knowing how structure impacts your current and future value, and your future risk, is extremely important. Knowledgeable Investment bankers, tax and legal professionals are critical to assist with assessing the implications and potential liabilities of a transaction.
5. Being the “Bad Guy” – Investment bankers serve as a buffer between buyer and seller. Most deals will get contentious at some point, and it helps to have a third party be a sounding board then also the messenger for difficult topics.

There are many more reasons why hiring an investment banking group to help with a transaction can deliver significant value. We encourage sellers with inbound offers to take a pause when considering next steps. Many sellers have spent years building their company, so taking time to understand their exit options is modestly incremental to the entire journey.

Yellow Cardinal offers business succession planning and merger and acquisition advisory services. The Firm does not provide legal, tax, or accounting advice. Investments are subject to investment risk including possible investment loss.

Your business-related facts and circumstances will determine your path forward and should be considered carefully. There are no guarantees that any one exit strategy will outperform another. Yellow Cardinal stands ready to assist you along your path to success. Please reach out to discover the additional ways Yellow Cardinal M&A Services can help.

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Carlton Zesch, Executive Managing Director, Investment Banking

Yellow Cardinal M&A Services, Inc.

A First Financial Company