If a Buyer Approaches You Directly, a Competitive Process Will Almost Always Get You More Money
- 16 hours ago
- 5 min read
By Kevin Taggart, CM&AP, Managing Partner | Mertz Taggart
You’ve built something valuable. You know it. And apparently, so does the buyer who just reached out.
Maybe it’s a name you recognize, a PE-backed strategic that is targeting your market. They’re complementary. They move fast. And somewhere in the conversation, they mention that working directly saves everyone the hassle of a process. Maybe even the fee.
It sounds reasonable. It isn’t.
We’ve been advising healthcare services owners on sell-side transactions for over a combined 36+ years and have closed more than 165 deals across multiple market cycles. The single most consistent finding: you cannot know what your company is worth until the market tells you.
And the market can only tell you if you ask it.
That’s true whether you’re running a $5 million company or a $50 million one. Two deals illustrate why.
Deal 1: Same Buyer, Direct Offer to Final Close — $7.5M to $15M
A behavioral health company was approached directly by a well-capitalized strategic buyer. The buyer knew the market, liked the company, and moved quickly. Their offer: $7.5 million.
It wasn’t a bad offer. The seller liked the buyer and was tempted to move forward. Instead, they engaged us for a free valuation before signing anything. Our view: we believed we could do meaningfully better than $7.5 million in a competitive process. The seller agreed to test the market — and, importantly, asked us to keep that initial buyer in the process. They liked them and wanted them to have a fair shot at the deal.
We ran a process. The same buyer came back to the table almost immediately, this time at $11.5 million — $4.0 million more than their original direct offer, a 53% increase — from the same buyer, on the same business, with the same diligence information. Nothing about the company had changed. What changed was that the buyer knew they were no longer the only one at the table.
Then competition took over. In total, we received 15 offers from credible, well-capitalized buyers. The deal ultimately closed at $15 million — a $7.5 million increase, or 100% above the original direct offer, and $3.5 million more than the same preferred buyer’s revised number. The seller got the buyer they wanted to work with, at a price the market — not the buyer — set.
Same buyer. Same company. Twice the price.
That additional $7.5 million didn’t come from catching the buyer in a lie or finding hidden value in the financials. It came from the buyer knowing they weren’t the only one at the table.
Deal 2: A Larger Business — From $37 Million to $52 Million
An outpatient behavioral health business came to us with a strong, rapidly growing operation. A buyer had already approached the seller directly with an offer of $37 million — a serious number from a serious acquirer.
We took the company to market. This was a competitive process, though more concentrated than most: we received 6 offers in total, all from legitimate, well-capitalized strategic and PE-backed buyers. Six was enough.
As the process developed, one buyer came in at a number very close to where the original buyer was sitting. That competing offer did exactly what a competitive process is supposed to do — it reframed the floor. We were able to use that leverage to move the buyer the seller wanted to work with up, well past their original $37 million number. They came back at $52 million, $15 million higher than where they started.
The deal closed at $52 million with the seller’s preferred buyer.
If that seller had responded directly to the initial $37 million offer — a perfectly reasonable-sounding number from a real buyer — they would have left $15 million on the table. The buyer they ultimately sold to was the same buyer they would have sold to in the direct deal. The only difference was the presence of competition, and a credible alternative bid sitting next to the preferred buyer’s offer.
Why the Spread Exists
Buyers aren’t dishonest when they approach you directly. They’re doing their job. A direct deal is better for them — less competition, less process, less price pressure.
What changes in a competitive process isn’t the buyer’s character. It’s their behavior. When a serious buyer knows another serious buyer is in the room, they move. The preferred buyer in Deal 1 didn’t go from $7.5 million to $11.5 million because they suddenly saw new value — they moved because they had to in order to stay in the deal. The preferred buyer in Deal 2 went from $37 million to $52 million for the same reason. Neither would have gotten there on their own.
That spread — $7.5 million versus $15 million on the smaller deal, $37 million versus $52 million on the larger one, in each case among qualified buyers looking at identical information — doesn’t close because one buyer is more honest than another. It closes because of competition.
One more thing these deals illustrate: never tell a buyer what you think your company is worth. If the Deal 1 sellers had volunteered that they thought $7.5 million was fair, they would have created a ceiling — and that ceiling would have cost them $7.5 million. If the Option 2 sellers had anchored to $37 million, they would have left $15 million behind.
It’s Not Just Price
Going direct doesn’t only cost you in headline value. In a competitive process, buyers sharpen their terms too — faster timelines, cleaner deal structure, less holdback, lower earnouts, shorter performance windows. When there’s no competition, there’s no urgency to be accommodating.
In both Deal 1 and Deal 2, the seller ended up working with a buyer they liked — in Deal 1, the same buyer who originally approached them. The competitive process didn’t cost them their preferred partner. It just made sure that partner paid market price.
We’ve written more broadly about the risks of going direct here. The mechanics aren’t complicated. What’s harder to internalize — until you see a real deal — is how much you’re leaving behind.
A motivated buyer negotiating with a seller who has no alternatives will pay what they have to. Not what they could.
Frequently Asked Questions
If a buyer approaches me directly, should I respond? You can have an initial conversation, but don’t share financials, don’t name a price, and don’t sign anything until you’ve spoken with an advisor. Engaging directly without running a process almost always means leaving money on the table.
Does a competitive process work even if I already know who I want to sell to? Yes. Competition changes buyer behavior regardless of your preference. In both deals above, the sellers’ eventual buyers paid significantly more because they knew others were at the table — not because they were the only option. In Deal 1, the seller’s preferred buyer paid twice their original direct offer. In Deal 2, the seller’s preferred buyer paid $15 million more.
What if the buyer says the offer expires if I hire an advisor? That’s a pressure tactic. A buyer who walks away because you ran a process was never going to give you their best number to begin with.
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