One Buyer or Ten? The Process Choice That Set the Price

The situation

Genevieve led corporate development for a mid-sized industrial group, and Femi ran deal execution under her. Their company had spent two years scouting for a bolt-on acquisition in the automotive parts supply chain, and a target in Windsor had come up repeatedly: a precision components manufacturer with a strong customer list, a capable second-generation owner named Kofi looking to retire, and revenue in the range that would move the needle without straining the balance sheet. The company's enterprise value, based on its earnings and comparable transactions, sat somewhere between $30 million and $50 million depending on how a buyer structured the deal.

Genevieve wanted to approach Kofi directly, quietly, and lock up exclusivity before anyone else in the sector noticed the business was even contemplating a sale. Femi agreed with the instinct but flagged a risk neither of them had fully priced in: if Kofi's own advisors decided to run a competitive process instead, the strategic acquirer's head start would evaporate, and worse, it might spend months and real advisory cost chasing a deal it would lose to a higher bidder. They retained our firm before making the first call, wanting a clear-eyed view of how the choice of process — one buyer or several — would actually shape the price and the risk on both sides.

The strategic problem

In a merger or acquisition, "process" is not a formality — it is often the single biggest lever on price. A seller who runs a controlled auction, inviting several qualified buyers to bid under the same rules and timeline, almost always extracts a higher price than a seller who negotiates with one buyer alone. Competition does the work that negotiating skill cannot: a buyer facing no rival has no reason to move off its opening number, while a buyer who believes it might lose the deal to someone else will stretch.

The flip side is real too. An auction takes longer, costs the seller more in advisory fees, and risks the deal becoming public knowledge among employees, customers, and competitors before anything is signed — a particular danger for a manufacturer whose customers might get nervous about supply continuity during a change of ownership. Some sellers, especially owner-operators nearing retirement, value a fast, quiet, certain sale over the last few dollars of price. That preference is exactly what a strategic acquirer wants to find and use.

Genevieve and Femi's task was to figure out, before making contact, which kind of seller they were dealing with — and to structure their approach so that even if the owner leaned toward a quiet deal, the acquirer's own conduct didn't accidentally invite competition it did not need to face. A poorly worded first letter, an offer pitched too low, or a public regulatory filing at the wrong moment can all push a reluctant seller toward calling in a broker and running a process the buyer never wanted.

What we did

1. Assessed the seller's likely posture before any contact was made. We worked through what was publicly known and knowable about the target: the owner's age and any public statements about succession, whether the business had used outside advisors before, and whether its financials and customer contracts were the kind that would attract multiple strategic and financial buyers if shopped. A business with concentrated, hard-to-replace customer relationships and clean records is far more auction-ready than one with informal bookkeeping and a single dominant customer — the latter tends to push sellers toward a known, patient buyer rather than a wide field.
2. Recommended a single, credible approach rather than a broad canvass. Because the target showed signs of being a good auction candidate on paper but a reluctant one in temperament — an owner who had turned down inbound interest before and valued discretion — we advised Genevieve to make one well-prepared approach rather than several exploratory ones, on the view that a credible, all-cash strategic buyer with a clear operating plan for the business would carry real weight with an owner who cared about legacy and continuity, not just price.
3. Built the opening offer to be strong enough to end the conversation, not start a negotiation grind. A common mistake in single-buyer approaches is opening too low, on the assumption that the price can rise over several rounds. With one buyer and no competitive tension to justify successive increases, that pattern instead reads as toying with the seller, and it is often what causes an insulted or wary owner to call an advisor and open the field. We helped structure an opening indication of interest priced close to what the acquirer's own valuation work supported as fair, so the number itself would do some of the persuading.
4. Used a letter of intent to lock in exclusivity early, on terms that protected both sides. A letter of intent, or LOI, is a preliminary document setting out the key terms of a proposed deal before the detailed purchase agreement is drafted; it is usually non-binding on price and structure but can bind the parties to specific promises, most importantly an exclusivity period during which the seller agrees not to negotiate with anyone else. We negotiated an exclusivity period long enough to complete due diligence and drafting, but tied to specific milestones and deadlines, so the seller retained confidence that the acquirer would move with real pace rather than sitting on a locked-up deal indefinitely.
5. Kept diligence tight and fast to reduce the seller's incentive to reconsider. The longer an exclusive period drags on, the more time a seller has to have second thoughts, receive an unsolicited approach from someone else despite the exclusivity commitment, or simply grow tired of the process. We worked with Genevieve and Femi's finance and operations teams to sequence financial, legal, and commercial due diligence in parallel rather than in sequence, and to raise issues with the seller promptly rather than batching them for a single late-stage list that could feel like the buyer was manufacturing leverage to chip at the price.
6. Structured the purchase agreement to reflect the deal actually negotiated. Because the transaction proceeded as an asset or share purchase of a private Ontario company — the specific structure depended on tax and liability considerations worked out with the client's accountants — the purchase agreement set out representations and warranties about the business, a mechanism for adjusting the price based on the company's working capital at closing, and post-closing indemnities allocating risk for anything that turned out to be inaccurate. None of this depended on whether the deal came from an auction or a single negotiation, but getting it right mattered just as much either way.

The outcome

The approach worked largely as planned. The owner, who valued a quick and confidential process over squeezing out the last few points of price, engaged seriously after the first meeting and signed the letter of intent within a few weeks rather than inviting other bidders. The exclusivity period held, due diligence surfaced a handful of manageable issues around equipment maintenance records and a customer contract nearing renewal, and the parties closed within the acquirer's target timeline at a price near the top of the $30 million to $50 million range the acquirer's own valuation work had supported.

Genevieve's team never had to find out what an auction would have produced, and that was, in a sense, the point. The strategic acquirer avoided the extra months, the advisory costs, and the price tension that a competitive process would likely have created, while the seller got the fast, discreet, certain outcome an owner nearing retirement often wants more than an extra few percentage points. The deal was not won by outbidding rivals — there were none — but by reading the seller correctly and moving with enough discipline and credibility that the seller never felt the need to look further.

The result was not automatic. Had the opening offer landed too low, or had exclusivity dragged without milestones, the same seller might well have called an advisor and turned the deal into exactly the auction Genevieve had hoped to avoid. The strategy worked because the process design matched what the seller actually valued, not because a single-buyer approach is inherently the right call — in a different deal, with a different seller, the same firm might have recommended running a full auction instead.

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