Why You Should Be Talking to at Least Three Prospective Buyers Simultaneously

Why You Should Be Talking to at Least Three Prospective Buyers Simultaneously

It is a scenario that occurs more often than one might think: an entrepreneur receives an approach from a prospective buyer — often a competitor or a long-standing business partner — and proceeds to negotiate bilaterally. The chemistry is good, the first conversation goes well, and before long the seller is in a process they never truly controlled. The outcome is almost always the same: too low a price, too many concessions, too little negotiating power.

Bilateral vs. Structured Competitive Process: The Fundamental Difference

In a bilateral negotiation with a single buyer, one iron rule applies: whoever has the alternatives has the power. And when the seller has no alternative, the buyer — consciously or unconsciously — dictates the pace, the terms, and ultimately the price.

In a structured competitive process, this power dynamic is reversed. The seller controls the process, sets the timelines, and decides which information flows to whom and when. Buyers who know that other bidders are in the running behave in a fundamentally different way — they bid faster, higher, and with fewer conditions.

What Happens When You Have Only One Buyer

The dynamics of a bilateral negotiation systematically disadvantage the seller:

• The buyer dictates the pace. They can extend Due Diligence, escalate demands, and wear the seller down — knowing full well that the seller has no alternative.
• Price reductions after Due Diligence are almost inevitable. Without competitive pressure, the buyer will always find something during Due Diligence to use as grounds for a price reduction — and the seller has no leverage to resist.
• Contractual terms deteriorate. Warranty periods lengthen, liability caps fall, earnout components increase. Every negotiating round comes at the seller's expense.

How the Structured Competitive Process Works

A professionally managed M&A process follows a defined sequence that creates competition while preserving confidentiality:

The Concrete Price Difference: What Competition Really Delivers

The numbers speak plainly: equivalent companies in structured competitive processes typically achieve 15 to 25% higher purchase price multiples than in bilateral negotiations. The reason is not magic — it is straightforward economics. When Buyer A knows that Buyers B and C are also bidding, they no longer calculate with their minimum offer but with their maximum offer.

In addition, competition improves not only prices but also terms. Buyers accept shorter warranty periods, higher liability caps, and smaller earnout components — because they do not want to lose the deal.

When Bilateral Negotiation Is Exceptionally Appropriate

There are situations in which a structured process is not the optimal solution. When a strategic buyer with unique synergy value is involved — for example, a global corporation that sees the company as a key to entering a new market — a direct, confidential negotiation may be preferable. In situations of extremely high confidentiality requirements, where even an anonymised process would allow conclusions to be drawn about the company, bilateral negotiation can also be justified. These exceptions confirm the rule: in virtually all other cases, competition is the seller's best friend.