Playbook
How to read an acquisition offer for your services business
The first twenty four hours of a cold approach, the ladder from headline down to money that actually moves, and how to price anything deferred.
The methodThe three reads: the approach, the ladder, the measure
This playbook is a method for reading an acquisition offer for your services business in three passes. The approach: what to do in the first twenty four hours after an unsolicited enquiry. The ladder: how to walk a completion waterfall from the headline figure down to the money that actually moves, on a date. The measure: how to price any deferred or conditional component by how much of its outcome you control rather than by how large it is. It is for founders of consultancies, agencies and managed service providers, bespoke or productised (productized), who have just had an approach or expect one, and especially for companies with outside investment on the cap table, where the waterfall matters most. It is the method I wish I had held on the first morning of the approach that came to us, and it is taught on an invented example that says so on every page.
An unsolicited approach arrives before you are ready for it. It is flattering, and it immediately consumes the attention of the one or two people the business cannot spare. The first mistakes are made in that first day: replying too fast, telling too many people, calling it an offer when it is an enquiry, and sending information before anyone has decided what may be shared. The second set of mistakes comes later, when a headline number is read as a price. A headline is the top of a ladder. What reaches the seller, and when, depends on everything beneath it.
The first read is a written protocol, held before an approach comes. Who receives it, so that it does not land on whoever opens the inbox. Who holds the conversation with the approaching party, and who does not. How the approach is named, accurately, because an enquiry, an indication and an offer each mean something different. How information is handled before any of it is shared, including what is never shared at this stage. And who covers the work this is about to consume, because the founder who takes the call is the founder who stops selling.
The second read is the ladder, and the playbook walks it on an invented company called, plainly, Example Consulting Ltd, with every figure labelled as made up. The headline is what an announcement would say. Below it sit the adjustments: debt and debt-like items, any working capital adjustment, any amount held back for a period against warranties, any portion deferred to later dates, and any portion conditional on future performance. Below those sit the claims that rank ahead of ordinary shareholders, such as an investor's preference where one exists. Only then is there a figure for the ordinary shares, and only then a figure for you, on a date. The interactive reader lets you change any rung and watch what reaches the bottom.
The third read is the measure. Anything deferred or conditional is priced not by its size but by how much of the condition you control after completion. If the condition depends on decisions the buyer makes, on integration, or on a sales team you no longer run, your control is low and that component is worth much less to you than its face. The control test in the playbook is a short list of questions, and the answer to each one moves the price you put on that rung.
What is deliberately not in it: any real transaction. Example Consulting Ltd is invented and is not modelled on one. There is also no valuation method, no advice on choosing advisers and no legal drafting. The playbook teaches you to read what is put in front of you. It does not tell you what to ask for.
I learned the first read by getting it partly wrong. When an approach came for the business Steve and I had started, there was no written protocol for the first day, and we improvised it. The playbook is the protocol we should have had: who is told, what is said and not said, and what is asked for before anyone replies.
The playbook is in development, with the worksheet and the interactive waterfall reader alongside it. Joining the waitlist means you hear when it is ready, and it lets me ask whether you are reading an approach now or preparing for one. Nothing is for sale yet.
What you will get
Who it is for
Questions
- What should you do in the first 24 hours after an unsolicited approach to buy your business?
- Follow a protocol you wrote before it came: decide who receives the approach, who holds the conversation, what the approach is called (enquiry, indication or offer), what information may be shared and on what terms, and who covers the work it will consume. Do not reply fast and do not widen the circle.
- How does a completion waterfall work in a business sale?
- It walks from the headline down. Adjustments for debt and working capital come off first, then any amount held back or deferred, then any amount conditional on future performance, then the claims that rank ahead of ordinary shares, such as an investor preference. What is left is divided among ordinary shareholders, on a date. The playbook walks it on an invented company with every figure labelled as made up.
- Is the worked example based on a real transaction?
- No. Example Consulting Ltd is invented and labelled as invented on every page, and the method is taught from published research and that example. Nothing from any real transaction is in the playbook or the reader, and the method applies to any structure you are shown.