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Legal · M&A

How to Handle Your First M&A Inquiry

Even when you don't want to sell — the playbook for response, signal management, and protecting optionality.
8 min readUpdated Apr 30, 2026

Most founders' first M&A inquiry comes when they're least prepared for it. The reflex is either to ignore it (missing real information) or to engage too eagerly (signaling availability and distracting from operations). The right move is in between: engage thoughtfully, learn, decide.

Read the inquiry first

Not all inquiries are equal. The signals to look for:

  • Who reached out. A corporate development executive at a serious acquirer is a real signal. A junior PE analyst doing market research is not.
  • What they said. "We're interested in companies like yours" is research. "We've been tracking you for X months and want to discuss" is intent.
  • Specificity. Specific references to your customers, product, or team suggest real interest. Generic language suggests a wide net.
  • Their company's recent M&A activity. Active acquirers are real; companies that haven't acquired in 5 years are usually fishing.

The first call

Take the first call regardless. 30 minutes, exploratory, no commitments. Goals:

  1. Understand their thesis. Why are they interested? What problem are they solving by acquiring?
  2. Understand the process. Are they running a structured process (multiple targets) or one-off interest?
  3. Understand the timeline. If you sold, when would they want to close? Tomorrow vs 12 months tells you a lot.
  4. Understand who's involved. Is this corp dev exploration, or does the CEO know about it?

Don't share confidential information yet. No customer lists, no financials, no roadmap details. Mutual NDA before any of that.

Don't volunteer a number

The most common mistake: founders quote a price too early.

The right answer when asked: "We're not for sale. If we were, the price that makes us seriously consider it would be a function of what we believe we'll be worth in 3-5 years. Happy to discuss further if there's mutual interest."

That answer:

  • Doesn't anchor low.
  • Signals you have alternative paths (continued operations).
  • Forces them to make the first credible offer.

Inform your board, not your team

Tell your board chair the same week. Be transparent: "Got an inquiry from X. First call went like this. Currently planning to engage further but no commitments. Wanted to keep you informed."

Don't tell the team. Premature M&A leaks cause:

  • Recruiting falls off (candidates avoid uncertain companies).
  • Existing team members start interviewing elsewhere.
  • Customers panic about long-term support.

Brief the team only when a deal is highly likely (signed LOI) or when transparency norms require it (this varies by company culture).

Decide if it's real

Real M&A interest typically progresses through:

  1. Initial inquiry call. Exploratory, low commitment.
  2. Mutual NDA + management deep dive. 2-4 weeks of exchanging information, including financials.
  3. Indication of Interest (IOI). Non-binding letter stating range of valuation and high-level structure. The first real signal.
  4. Letter of Intent (LOI). More detailed terms, exclusivity period, real engagement.
  5. Diligence + final negotiation. 4-12 weeks.
  6. Definitive agreement and close. Final.

At each stage, your optionality decreases. Stages 1-2 are mostly information; stages 3+ are real commitments.

The valuation conversation

When asked for a number, anchor high but defensible:

  • Bottom anchor: 4-6x ARR for a healthy SaaS company growing 80%+. More for category leaders.
  • Top anchor: 8-15x ARR for category-defining companies with strategic value to the acquirer.
  • Premium considerations: Acquihire value of the team, IP value, market expansion the acquirer would otherwise have to build.

Use our valuation calculator to triangulate the number, then add 30-50% for the negotiation.

When to walk away

Some inquiries should end after the first call:

  • The acquirer is fishing (no real intent).
  • The number is materially below your fundraising-implied valuation.
  • The process timeline doesn't fit yours.
  • The acquirer has a poor reputation for treating acquired teams.

Walking away cleanly: "Thanks for the conversation. Right now we're focused on continuing to build — let's stay in touch."

Common M&A mistakes

  • Engaging too eagerly. Signals you're for sale at any price. Maintains too much optionality with a casual tone.
  • Sharing info before NDA. Customer lists, financial data, technical architecture. Always behind a mutual NDA.
  • Quoting a number first. Anchors against you. Let them propose; counter from their starting point.
  • Hiding it from your board. Even if nothing serious comes of it. Builds trust if you mention it casually before it becomes formal.
  • Negotiating without a banker on $50M+ deals. The banker fee is more than offset by typical price improvement.

First M&A inquiries are usually flattering and rarely substantive. Treat them as information-gathering, not as decision points. The real exits come from running structured processes, not ad-hoc responses.

FAQ

Should I always engage with M&A inquiries?+
Yes, briefly. Take the first call to learn — what they value, who's behind it, what process they're running. Information has value even if you decide not to sell.
Can talking to acquirers hurt my fundraising?+
Yes if mishandled. Investors smell when founders are distracted by exit conversations. Be transparent with your board about M&A discussions; never hide them.
Do I need a banker for M&A?+
Not for the initial conversation. Yes if it becomes a real process — bankers (Qatalyst, Goldman, Lazard, smaller boutiques) typically cost 1-3% of deal value but materially improve outcomes for $50M+ deals.
Should I tell my team about M&A discussions?+
Not until it's serious. Premature disclosure causes recruiting and retention issues. Tell your board first; tell the team only when a deal is likely or required by transparency considerations.
What's a 'reverse pitch' and should I use one?+
Reverse pitch = your terms, your number, your conditions. Used when an acquirer is genuinely interested but you're not sure you want to sell. Sets a high bar; if they meet it, you sell. If not, conversation ends cleanly.