How Targeted Should Your Sale Process Be?

By Capital West Partners
Published: July 1, 2020 | Last updated: March 21, 2024
Key Takeaways

Looking at your potential buyer list, comprised of other businesses, investment firms and individuals that could be approached during your sale process, you will quickly see there are significant pros and cons to both a narrow and a broad sale process.


When you decide the time is right to sell your business, one of the first questions you’ll have is how targeted should my sale process be? Looking at your potential buyer list, comprised of other businesses, investment firms and individuals that could be approached during your sale process, you will quickly see there are significant pros and cons to both a narrow and a broad sale process.


So, how do you determine the right number of buyers to approach?

Understanding Your Options as a Seller

At one end of the sale process spectrum is a broad auction, meaning your opportunity is communicated widely to a long list of potential buyers, generally over 25 parties. At the other end of the spectrum is a negotiation with only one party.


With a multitude of options in between, it’s our experience that there is a "sweet spot" on this spectrum for your unique deal, and making the right decisions up front will greatly affect your final outcome. Finding that sweet spot requires a careful and objective evaluation of your opportunity as well as its context and potential buyers.

Anticipating Interplay Between Priorities

First consider that while many influencing factors are at play, there are consistently three key seller priorities that affect the approach to targeting. As the seller, you are likely seeking maximum value, on a short timeline, with the transaction completed as confidentially as possible.

With these three priorities in mind — value, speed and confidentiality — you might intuitively conclude that a sale process should be very targeted, and approach a shorter list of potential buyers. In fact, it may even be the case that you’ve already been approached by a potential buyer who’s looking to negotiate a deal. You may be considering exclusive talks with this single buyer, which at first glance could successfully achieve all three of your objectives.


While a targeted sale process with one or a handful of buyers may be the right answer in the end, the issue deserves thorough and deliberate consideration early on to ensure your best outcome. Therefore, our advice is to pause.

Experience has shown us that, contrary to what you might believe, a targeted sale process will not necessarily give you the result you’re looking for — a faster, less disruptive and more confidential process. Furthermore, it may not lead to maximum value for your sale.


Similarly, many conclude that a sale process that contacts a large number of buyers may be the safest way to increase your chances of a competitive process. But sometimes this broad canvass of buyers doesn’t make sense either. It could be detrimental to your other objectives by, for example, putting sensitive business information in the hands of competitors.

Ultimately, only a properly structured process will certainly achieve all three of your objectives. To properly structure your process, a thorough and objective consideration of your context is integral.

4 Key Questions to Determine Scope of Auction Process

We offer you some of the key questions that can be used to begin to ascertain how broad or how narrow your sale process should be:

1. Is there a small number of buyers who would reasonably have interest and have the financial wherewithal to pay a fair price for your business?

In some situations, it’s obvious there are only a handful of buyers who will derive great synergies and other strategic value from the acquisition. Often this handful includes key competitors. If these players also have the financial ability to pay a fair price, a broad process may not add further value to your deal.

2. Is yours a business where very specialized industry experience and knowledge are required in order to get comfortable with the acquisition?

In some cases, there is a long list of potentially interested buyers, but we know that a buyer needs specific industry knowledge to become comfortable with due diligence and ultimately close on the deal. This is often the case if your industry is one where market or regulatory conditions are going through rapid change and, as such, we would likely focus only on buyers who are "in the know".

If your industry is not like this, and is more readily understood by even those who are not industry specialists, it typically means there is a longer list of parties that could close your deal at an attractive value. Therefore, a broader process could be your best route to ensure you flush out the best bidder.

3. Are you confident that, among the shorter list of buyers, there will be several bidders who will make attractive offers?

If you’re not confident, a broader process should be seriously considered. Sometimes the buyers expected to be the most aggressive don’t behave that way. In fact, once in a while they don’t bid at all. Buyers’ investment decisions are influenced by many factors — those related to the business or even those that are unrelated in some cases.

They may be preoccupied with another acquisition or a major project and simply haven’t the time to focus on the deal you’ve presented. Knowing your buyers intimately is essential to a confident bidding process. Approaching only five buyers and receiving a single offer is clearly less than ideal for creating competitive deal tension.

4. Will it be damaging to the business to share confidential information to numerous parties?

If this is the case, a more targeted process is merited and, typically, you would approach a small number of buyers with a particularly high priority on limiting disclosure of information to parties wherever possible.

What Process is Best For You?

The points above are illustrated in this simple chart:

Sale Process with narrower process and broader process

At the end of the day, what you need to properly determine an appropriately targeted sale process is a rigorous analysis of your potential buyers, experience of each individual buyer’s habits in other deal situations as well as additional market intelligence. Your analysis should consider not only the obvious buyers, but some of the "dark horses" as well.

It is surprising how often the winning buyer is a group that wasn’t on the initial "A list" of buyers. Evaluating and managing multiple buyers can be challenging, but a good financial advisor will guide you through this to give you the best chance of closing a successful deal that meets or exceeds all of your objectives.

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Capital West Partners
Established in 1990, Capital West Partners is an independent corporate finance advisory firm, based in Vancouver, British Columbia.

As M&A specialists in the mid-market, we deliver focused financial advice and corporate transaction expertise to management teams, publicly and privately owned businesses, corporations and government entities in Western Canada.

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