Why Business Owners Should Be Cautious When Responding to Direct Calls from Corporate Buyers

When corporate & private equity buyers reach out directly to small business owners in the pet care industry with interest in acquiring their business, it feels very flattering and exciting. However, these situations often come with significant risks for the unprepared owner. Without proper knowledge of the market, business owners risk selling their business for far less than it’s worth, losing leverage, and entering a deal that may not align with their goals.

Here’s why responding to corporate buyers without preparation can cost you and what you should do instead.

You Lose All Leverage

When you engage with a single buyer directly, you forfeit the ability to negotiate effectively. There’s simply no way around; it is simply how that situation is set up.

• No competition: The buyer knows they’re your only option and will use that to push for a lower price.
• Unfavorable terms: Buyers may include terms that benefit them, such as extended payment timelines or unfavorable transition requirements.
• Reduced confidence: Without knowing how to value your business or what other buyers might offer, you’re at the mercy of their proposal.

You Don’t Know What the Market Is Like

Without a clear understanding of market conditions, you risk selling your business for far less than its true value.

• Market benchmarks: Corporate buyers often have detailed data on what businesses like yours are worth in the current market, giving them a significant advantage.
• Your business’s unique value: You may not fully understand how to quantify your business’s strengths, such as recurring revenue, customer loyalty, or growth potential.
• Competitive interest: A single buyer reaching out does not reflect the full demand for your business. You may leave significant money on the table by not exploring other buyers.

Corporate Buyers Are Experts at Negotiating Deals

Corporate buyers are experienced professionals trained to acquire businesses at the lowest possible cost.  The representatives are nice, personable with only that goal in mind. Their strategies often include:

• Positioning themselves as your best option: They may suggest that working directly with them avoids complications and fees, making it seem like a “win-win.”
• Offering quick and easy deals: While this sounds appealing, these deals often come with lower valuations and unfavorable terms for the seller.

Creating urgency:

Buyers may pressure you to act quickly, discouraging you from seeking advice or exploring other options.

You Risk Overlooking Key Deal Elements

Selling a business isn’t just about the purchase price—it’s about the deal structure, transition and long-term implications. Without expertise, you might overlook:

• Earnouts or contingencies: Buyers may tie part of the payment to future performance, putting you at risk if the business underperforms after the sale (under corporate management)
• Legal pitfalls: Corporate buyers have teams of lawyers who draft agreements in their favor, potentially leaving you exposed.
• Transition requirements: You may be expected to stay involved for longer than you anticipated, often with limited compensation.

What You Should Do Instead

If a corporate buyer contacts you directly, don’t rush into discussions. Take these steps to protect your interests:

1. Pause and Evaluate
   Politely thank the buyer for their interest and let them know you’ll need time to consider. Avoid sharing too much information early on, especially sharing any financials.
2. Understand Your Business’s Value
   Get a professional valuation to understand what your business is truly worth in the current market. This will give you a baseline for negotiations.
3. Explore Other Buyers
   One buyer’s interest doesn’t represent the entire market. By opening your business to multiple potential buyers, you create competition, increase your leverage and maybe most importantly, retain control of the sale of YOUR business.
4. Seek Expert Advice
   Hire a broker or an M&A advisor to ensure you’re making informed decisions.
5. Negotiate Strategically
   Once you’ve done your homework and understand your business’s value, you’ll be in a stronger position to negotiate terms that not only work for you but are market based.

Conclusion

Responding to a direct call from a corporate buyer without preparation can be a costly mistake for business owners. Corporate buyers are skilled at securing deals that benefit them, and without understanding your business’s value or the market landscape, you risk losing leverage and leaving money on the table.

Take your time, do your research and involve trusted advisors. By approaching the sale of your business strategically, you can secure the deal you deserve and protect the legacy you’ve built.  PET|VET represents sellers only – I only have your best interest in mind. You can reach me directly at teija@petvetsales.com.

Teija Heikkilä, CEO and Top Broker for the Pet Care Industry