M&A Bidding War
8 min read
If you hold a signed LOI or you’re one email away from signing one, you don’t need more “interest.” You need leverage.
So here’s what leverage looked like in one Southern California manufacturing exit: a $15 million unsolicited offer turned into a $20.2 million outcome, and it happened because we created competition and forced the terms into the open.
Key takeaways
- A “great” unsolicited offer can hide a structural trap, because the headline price rarely tells you what you actually bank.
- An earn-out can shift control to the buyer after closing, so it can turn a sure thing into a long, stressful maybe.
- A controlled auction creates leverage without chaos, but only if you protect confidentiality and run deadlines like a process.
Key note: The first offer often buys your exclusivity, and that exclusivity costs you negotiating power.
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The setup: an unsolicited offer to buy a business can feel like a shortcut
In this case, that unsolicited offer to buy a business looked clean at first glance, but it hid terms that could have delayed or erased the real proceeds.
Robert (64) ran a second-generation specialty aerospace parts manufacturer in Southern California. He felt the post-COVID supply chain whiplash every week, and he also felt the burnout.
Then a prominent private equity associate sent a flattering LinkedIn message. A few friendly calls followed, and Robert shared high-level financials.
Soon after, the buyer sent an unsolicited Letter of Intent (LOI) for $15 million.
Robert felt relief, and he also felt smart. $15 million looked like enough to retire, so he asked the question many California founders ask:
Why pay an advisor a success fee when I already have the buyer at the table?
Don’t have time to read? Take a shortcut
Hit Play
The trap: the LOI headline hid a $6M earn-out that Robert didn’t control
Robert’s wealth manager suggested a simple move: let Vinil review the LOI before Robert signed.
That review changed the entire deal.
The buyer offered $15 million on paper, but only $9 million came as guaranteed cash at close. The remaining $6 million sat inside an earn-out.
An earn-out ties part of your purchase price to post-closing performance targets, according to Wall Street Prep’s explainer on earn-outs in M&A (2023). That structure can bridge a valuation gap, but it can also create a new problem because the buyer controls the levers after closing.
Robert didn’t plan to “miss” the earn-out, but he also couldn’t run the business the same way after close. The buyer would control budgets, hiring, pricing, and integration decisions, and those decisions could decide whether Robert ever saw that $6 million.
Warning: When a buyer controls the targets and the scoreboard, an earn-out can turn into a dispute instead of a payout. Kroll explains why earn-outs often become a source of post-closing disputes (2024).
The valuation gap: California aerospace manufacturing often earns a strategic premium
We also ran our own Opinion of Value.
Because Robert’s shop owned specialized CNC machinery, held AS9100 certifications, and had valuable LTAs (Long Term Agreements), we saw strategic value that the unsolicited offer ignored. In our judgment, the business could command closer to $18 million in an open market process.
Robert didn’t need a miracle buyer. He needed multiple qualified buyers because multiple buyers create options.
So we asked him to pause direct negotiations. He could keep talking with the original buyer, but he couldn’t keep negotiating inside a vacuum.
Creating the arena: a controlled auction builds leverage without blowing confidentiality
We informed the private equity firm that Robert retained Dream Business Brokers and that we would run a formal, competitive process.
The buyer didn’t love that change, yet their frustration gave us a useful signal: they likely knew they had anchored the first offer low.
Then we built the infrastructure that lets a California founder sell without turning the process into a rumor.
In tight Southern California industrial markets, confidentiality isn’t just a preference—it’s the difference between a quiet process and a fast-moving rumor mill. One supplier mention, one customer email chain, or one competitor whisper can ripple through a small manufacturing ecosystem in days.
That’s why we treated information control as a deal lever from day one.
- We prepared a blinded teaser that described the opportunity without identifying the company.
- We built a comprehensive Virtual Data Room (VDR) so buyers could review documents in a controlled way.
- We quietly targeted a curated list of buyers across strategic buyers, family offices, and private equity.
And we protected Robert’s biggest fear: competitors.
If you want the detailed playbook, read Dream Business Brokers’ guide to how we protect your data when a competitor joins the process.
The M&A bidding war: deadlines turn interest into real offers
A controlled auction works because it uses structure and timing, not hype.
First, we set a deadline for initial bids. These early-stage bids typically come in as IOIs (Indications of Interest), which are high-level signals of price range and structure rather than a fully negotiated agreement.
An IOI comes earlier in the process, while an LOI comes later and usually gets more specific, as Transacted explains in its plain-English breakdown of IOI vs. LOI (2022).
We received five IOIs ranging from $14 million to $18 million, and the original buyer increased to $16 million.
Next, we moved into management presentations.
We invited the top three bidders to tour the facility after hours because Robert needed confidentiality from staff, customers, and vendors.
Then we ran the final squeeze: best-and-final.
We told all three buyers they faced real competition, and we asked for their best-and-final offers by a hard deadline after going through some more detailed point by point negotiations. That deadline mattered because sellers lose leverage once they grant exclusivity.
Wall Street Prep’s sell-side overview shows how a structured process typically runs: an IOI round, then management presentations, then final bids, and only then does the seller grant exclusivity during negotiations in a competitive sell-side process.
The outcome: $20.2M, 90% cash at close, and what it takes to sell a manufacturing business in California
A strategic buyer—a larger, out-of-state aerospace supplier that wanted a California footprint—submitted the winning bid at $20.2 million.
But the number didn’t win the deal by itself. The structure did.
Here’s what Robert secured:
- $18.1 million (90%) in cash at close
- Zero earn-outs
- A lease on Robert’s building (which he owned), so he captured passive rental income going forward.
- Guaranteed two-year employment contracts for Robert’s top three floor managers
That combination protected Robert’s net, and it also protected his people.
The ROI: the advisory fee didn’t cost Robert money—it cost him less risk
After paying the advisory fee, Robert walked away with millions more in guaranteed cash than the original “flattering” unsolicited offer.
He also walked away with cleaner terms, because he removed the earn-out and negotiated employee protections while he still held leverage.
Never sell in a vacuum: competition creates leverage, and leverage creates options
Buyers negotiate for a living, but most founders sell a business once.
So if you negotiate with one buyer, you give that buyer the power to set the multiple, the structure, the timeline, and the rules.
Yet if you create a credible competitive alternative, you can force clarity:
- You can pressure buyers to move cash to close.
- You can pressure buyers to drop aggressive terms.
- You can pressure buyers to prove certainty, because uncertainty becomes expensive when someone else wants the deal.
FAQ: quick answers for founders holding an LOI
An M&A bidding war happens when multiple qualified buyers compete for your business at the same time, so each buyer improves price and terms to win. You create it by running a controlled process with deadlines, not by “shopping the deal” casually.
You can treat an unsolicited offer as a starting point, but you should verify value and terms before you sign anything. In many California manufacturing exits, the first offer anchors the process, so you may leave money on the table unless you test the market.
“Best and final” is the last round where shortlisted buyers submit their strongest offer by a deadline. Sellers use it to compare both price and terms, and they use it to choose a buyer before exclusivity reduces leverage.
Next step: get a confidential LOI review before you sign
If you’re reviewing an unsolicited offer, don’t sign the LOI until we calculate your true market value and stress-test the terms.
Schedule a confidential offer review with Dream Business Brokers.
Author, editorial standards, and disclosures
Author: Vinil Ramchandran, Founder, Dream Business Brokers (CM&AP, CBB, CBI)
Professional memberships: IBBA (International Business Brokers Association); M&A Source; CBI; California Association of Business Brokers (CABB)
Last updated: 2026-04-24
Editorial standards: This article is written internally by a certified business intermediary/M&A advisor. Tax-related references are provided for general education and should be reviewed with qualified tax counsel for your fact pattern.
Disclosure: Dream Business Brokers represents sellers and may be compensated when a transaction closes.
Disclaimer: This article provides general educational information and does not provide legal or tax advice. Talk with qualified legal and tax advisors about your situation.
