Overview
	Selling a Business
	Exit Planning
	Improving Profitability & Quality of Life
	Business Valuation

	Email This Page
	Print This Page

Should You Sell to or Merge with a Competitor?

> Back to Key Questions

A competitor approaches you and offers to buy you out or merge with you.    Should you consider the proposal?

This is a very tricky question for which it is hard to generalize an answer.  In some cases, a sale or merger with to a competitor could provide better financial rewards than a sale to a non-competitor, and create a much stronger combined entity, due to potential synergies.  In other cases, it could be a disaster, no more than a pretext to gather confidential information about your company to use against you.  Consider, for example, the dispute of Hawaiian Airlines and Mesa Air.

As noted in on our discussion of protecting confidentiality, mere rumors that your business is for sale can cause significant damage.  Companies in your industry can wreak much more havoc, since they know the key players and may be in a position to take customers, suppliers or even employees from you. Of course most companies conduct themselves with integrity, but one can never be sure how any particular company will act. 

Naturally, if you have no real motivation to sell, are very happy with your business as is, there is not much reason to consider a sale or merger.  It’s unlikely the buyer will offer so much that your motivation will radically change.

But if you are open to the idea of a sale, it is worth at least listening to what the competitor has to say.   Avoid revealing much about your business or anything confidential until you have a better sense of their seriousness, financial resources, price expectations, reputation for integrity and honesty, etc.  Require the competitor to sign a confidentiality agreement before revealing sensitive information, and even then you need to withhold the most potentially damaging data. 

Finally, get assistance from a professional business intermediary who handles these situations day in and day out.  The mere consideration of a sale to a competitor could be one of the most critical and fateful business decisions you will every make.  The vast majority of attempts of competitors to merger or acquire results in failure, and frequently in lawsuits.  After investing 5, 10, 20 or more years of blood, sweat, tears and personal capital in your business, do you really want to wing it and risk it all without professional guidance?