by Glen Cooper, CBA
Brokers require buyer prospects to provide background information about themselves and to sign a confidentiality (or non-disclosure) agreement. This is a reasonable and fair request.
In our office, we require each individual buyer prospect to complete a one-page “Buyer Registration Form” and to sign a one-page 390-word confidentiality agreement. We have a separate form for corporations, partnerships and groups. Most serious buyer prospects will complete the form and sign the agreement without a single word change. We send these by mail, fax or e-mail and we accept them back in any of these three ways.
Our simple form asks for the buyer prospect’s contact information, acquisition criteria, and financial disclosure of cash available for the business purchase. We also ask for a resume and financial statement from individual buyer prospects, and other relevant types of financially qualifying information (like annual reports) from companies and buy-out groups.
We usually conclude that prospective buyers are unqualified if they don’t register. But, if a buyer prospect objects for a reason we find credible, we require at least some type of third-party reference (like a local bank reference) to proceed with any disclosure or discussions.
It can be tempting to relax buyer prospect qualification requirements. Both brokers and sellers are naturally enthusiastic about new prospects. It is always exciting to have the phone ring. This feeling is even more intense if there hasn’t been much response to the marketing effort, or if a negotiation has just fallen though and the seller is ‘on the rebound.’
A sincerely interested and qualified prospective buyer will almost always be courteous, understanding and compliant with a registration and pre-qualification process that is fair and reasonable. It is critical, even at the level of the smallest business, that you know who is trying to buy your company.