We often see smaller businesses receiving weekly outreach from interested buyers. This buyer interest tends to come from financial, rather than strategic, buyers, and is typically driven by the prospect of acquiring a business at a below-market valuation from a seller who lacks the market context to recognize it. In Myth #1, we introduced information asymmetry; it is most visible in these “interested buyer” calls.
Why High Inbound Volume Is Not What It Appears
There is a whole segment of buyers whose investment thesis amounts to little more than acquiring companies at below-market valuations and exiting the rolled-up business at an at-market valuation within a few years. Their pitch is that the transaction will be “easy” and the seller will get a “second bite” at an exit by taking equity in their venture.
However, by drastically undervaluing the business in the first place, a seller would need a 2–3× increase on the new equity simply to get back to their own market valuation. This is not a second bite, it is a significant dilution dressed as an opportunity. Many buyers’ investment theses rely entirely on their ability to acquire undervalued companies.
What Inbound Volume Actually Signals
High inbound buyer activity is not an indication of genuine market demand at fair value. It is primarily an indication of how easy it is to acquire below market, without ever engaging a seller who understands the inherent value of what they have built.
What Happens When Advisors Engage
On many acquisitions that Bravery leads, founders have been fielding persistent calls from prospective buyers. Once directed to Bravery as their sell-side advisor, a significant portion of that interest disappears, because the “bargain” deal is no longer available.
The Information Asymmetry Problem
Inbound buyer calls create the illusion that a business is highly sought-after and that a sale will be straightforward. In reality, buyers making unsolicited approaches are often the least likely to pay market value. They rely on the seller’s lack of market context to make the transaction appear attractive on terms that heavily favor the buyer.
Common tactics used by opportunistic buyers include: making an attractive nominal offer with subtle clauses that make the effective valuation significantly less; undervaluing the target while paying mostly with equity in the acquiring company with the promise that this equity will increase; and creating artificial urgency to prevent the seller from seeking independent advice.
The key is to know your market valuation range and deal structures, then filter accordingly. Without this context, sellers are not evaluating offers, they are accepting or rejecting offers blindly.
What High-Quality Buyers Look Like
Many excellent buyers and their representatives do reach out to prospective targets, but their targets are usually large enough to have come to their attention through a formal process or referral network. For smaller firms, approaches from genuinely strategic buyers are the exception rather than the norm.
Selecting advisors with a deep understanding of the company, the industry, current market dynamics, and comparable valuations is the most important step in filtering inbound interest. An advisory that works across industries without depth in the seller’s specific domain will net a generic multiple, potentially leaving behind a significant component of the total available valuation.
Bravery Group’s philosophy is that a desirable acquirer must bring value to the equation that allows the combination to be more than the sum of its parts. Buyers that simply want to bring “executive leadership” and charge management fees won’t provide the post-acquisition synergies that generate future value for the seller, and they are not the buyers that deserve to acquire your business.