Chapter 6: Find the right buyer for your business
Find a buyer for your business: types of buyer, screening questions, how buyers finance the purchase and how to choose between interested parties.
6 min readUpdated
The right buyer is not necessarily the one who offers the most. It is the buyer who can and will complete the deal on terms you can accept — and who fits what you want for the business, the employees and your own future. Good screening early in the process saves you many wasted hours and protects your confidential information.
Types of buyer
| Buyer | Typical motive | Strengths | Points to watch |
|---|---|---|---|
| Strategic buyer (competitor, supplier, customer) | Synergies, market share, new customers or products | Can often pay more and move quickly | Confidentiality — information can be misused if the deal falls through |
| Private buyer / self-employed | Own job, own business, lifestyle | Motivated and committed | Limited equity; dependent on bank financing |
| Employee or management (MBO) | Continuing what they know | Knows the business; reassurance for customers and employees | Financing; often needs vendor financing |
| Family | Succession | Continuity | Special tax rules; family dynamics |
| Investor / private equity fund | Return, growth, buy-and-build strategy | Professional, well capitalised | Often requires management to stay; extensive due diligence |
| Digital acquirer | Building a portfolio of sites, shops or apps | Experienced and fast | Focus on the numbers; the price closely tracks documented earnings |
Screening — before you share anything
Once the listing is live, the first enquiries arrive. Some are serious buyers; others are curious competitors, people who are “just looking”, or brokers hunting for assignments. Ask everyone the same basic questions before you share more than the listing:
- Who are you, and what is your background (industry experience, management, previous acquisitions)?
- Why are you interested in this particular business?
- Are you buying personally or through a company, and who is behind the company?
- How will you finance the purchase — how much equity do you have, and have you spoken to a bank?
- What is your time frame?
- Do you have other business interests in the same industry (competitor)?
- Are you willing to sign a non-disclosure agreement (NDA)?
On Sitavo you can see whether the buyer has verified their identity, and you can require a signed NDA before the buyer gets access to more information. You approve or decline each NDA request yourself. That is a good first filter. Trust your gut feeling too: a buyer who asks lots of questions about your customers and prices but dodges questions about themselves should give you cause for caution.
Competitors
A competitor can be the best buyer — but also the most dangerous. Share information in small pieces, and hold back the most sensitive information (customer names, prices, margins per customer) until a letter of intent has been signed. Consider letting an adviser or broker handle the contact.
How will the buyer finance the purchase?
Many deals founder not on the price but on the financing. So it is in your interest to understand how the buyer intends to pay — and to be prepared to contribute to the solution.
- Equity: The buyer’s own funds. Banks typically expect the buyer to put in a significant part of the purchase price themselves.
- Bank loan: Banks attach weight to the business’s documented earnings, the buyer’s experience and security. Good documentation on your part makes it easier for the buyer to get the loan.
- Public financing schemes: The Danish state investment fund EIFO (formerly Vækstfonden) and similar bodies have at times offered loans or guarantees for changes of ownership. The buyer should look into the current options.
- Investors: The buyer may bring partners or investors into the purchase.
- Vendor financing: You leave part of the purchase price outstanding as a loan to the buyer.
- Earn-out: Part of the price depends on the business’s results after the handover.
Vendor financing
With vendor financing (a vendor loan), the buyer pays part of the price in cash on the takeover date, while the rest is repaid with interest over an agreed period. It can get a deal over the line that could not otherwise be financed, and it shows the buyer and the bank that you believe in the business. In return, you take on a credit risk: if things go badly for the buyer, you risk not getting your money. On Sitavo you can indicate in the listing that vendor financing is possible, and in the deal you can create a loan agreement with a down payment and instalments that you both accept. Sitavo sends reminders about the instalments but does not handle the payments. Loans, interest and security are covered in more detail in Financing a business acquisition.
- Agree the interest rate, repayment profile, term and what happens in the event of default.
- Require security, e.g. a charge over the assets or shares, or a personal guarantee from the buyer.
- Clarify with the buyer’s bank whether your loan must rank behind the bank’s loan (subordination).
- Consider whether you can be allowed to follow the business’s figures for as long as the loan remains outstanding.
- Have your accountant assess the tax consequences of part of the payment arriving later.
Earn-out
With an earn-out, part of the purchase price depends on the business reaching specific targets after the handover — for example a given revenue or EBITDA in the first 1–3 years. Earn-outs are typically used when the parties disagree on the value because the seller expects growth that the buyer is not willing to pay for up front. Measurement, tax and pitfalls are covered in Earn-out.
| Advantage for the seller | Risk for the seller |
|---|---|
| Opportunity for a higher total price | You no longer control the decisions that affect the result |
| Can bridge disagreement about the value | The buyer can change costs, prices or accounting practice |
| Makes the deal easier to finance | Disagreement about the calculation can lead to disputes |
Make the earn-out measurable
Define precisely which figure is measured, how it is calculated, which accounting practice applies, who calculates it and what happens if the buyer sells the business on or changes it substantially. The simpler the target (e.g. revenue rather than profit), the less room for disagreement.
Choosing between several interested parties
Having several interested parties is a big advantage — but only if you manage the process. Set a deadline for indicative offers, compare the offers on price, structure, financing, conditions and timetable, and then choose one or two buyers to go further with. Be honest with buyers that there are other interested parties, but avoid promising anything you can’t keep. On Sitavo you can set a bidding deadline on the listing (a bidding round) so everyone knows when to bid by — or sell at auction, where bids are public and binding on the buyer. See Bidding rounds and auctions and Receiving offers.
- How much of the price is paid in cash on takeover?
- Is the financing documented, or only an intention?
- What conditions are attached to the offer?
- How long will the buyer spend on due diligence?
- What does the buyer expect of you after the handover?
- What does the buyer intend to do with the employees, the name and the premises?
Frequently asked questions
List the business for sale with a clear listing that describes it without revealing too much. On Sitavo, buyers find listings through search, categories and search alerts, and with a listing package the listing is also featured and shown across Sitavo’s network of lookup sites. You can also invite a buyer you already know.
Ask everyone the same basic questions about background, motive, financing and timescale before sharing more than the listing. Check whether the buyer has verified their identity, require an NDA, and be wary of buyers who ask a lot about your customers and prices but little about themselves.
A competitor can often pay the most because of synergies, but is also the buyer who could misuse the information if the deal falls through. Share in small portions, hold back customer names and prices until late in the process, and consider letting an adviser handle the contact.
Manage the process: set a deadline for offers and compare them on price, cash share, financing, conditions and timetable. On Sitavo you can set a bidding deadline with a bidding round or sell at auction with binding bids.
Because the buyer rarely has the full price, and the bank requires documented earnings, equity and security. Good documentation from you and possibly a vendor loan for part of the price can be what gets the deal done.
Did you find the answer to your question?
Related articles
- Chapter 5: The sales material — listing, sales prospectus and key figuresCreate a listing, sales prospectus and key figures sheet that sell the business without revealing it: discreet sale, figures as ranges and an NDA first.
- Chapter 7: Confidentiality and NDAs when selling a businessKeep the sale confidential: what an NDA should cover, what to share at each stage, how to handle it internally and what to do if something leaks.
- Bidding rounds and auctions: selling or buying a business at auctionHow bidding rounds and auctions work on Sitavo: deadline, starting bid, increment, hidden reserve, auto-bid, the hammer and if the winner backs out.
- Financing a business acquisition and vendor financingHow to finance buying a Danish business: equity, bank loans, EIFO guarantees and growth loans, vendor loans and earn-outs — and what the bank looks for.