A serious buyer: the criteria to assess a candidate

Quick answer. A serious buyer shows eight signals: substantiated financing, a precise letter of intent, acceptance of confidentiality and due diligence, consistent experience, motivation built around a project, a realistic timetable, mandated advisers, and a constructive stance on the representations and warranties. A candidate evasive about money, or eager to obtain everything without signing anything, should alert the seller.

Not all buyout candidates are equal. The seller loses precious time, sometimes their confidentiality, with people who will never go all the way: the curious, competitors fishing for information, or sincere buyers unable to secure financing. Knowing how to assess a buyer's seriousness from the first exchanges protects the operation and focuses energy on the right profiles. This article sets out the eight criteria, the order in which to check them, and the signals that should reverse the seller's caution.

The public bodies that support business transfers, such as Bpifrance Création and the State's Entreprendre portal, describe a sale in structured stages: preparation, buyer search, negotiation, acquisition audit, then agreement protocol and guarantees. They place the emphasis on one point: it is the confidentiality undertaking, signed before any sharing of detailed information, that protects the seller. Our practitioner conviction goes one step further: alongside this contractual protection, we add a sort on the candidate's financial strength, because an unfinanced buyer wastes months even after signing a confidentiality undertaking.

The first and, to us, the most discriminating criterion is the real ability to finance the buyout. A serious buyer can show how they will finance the operation: personal contribution, bank agreement in principle, investor support, an honour loan, sometimes a seller's loan. Conversely, a candidate who stays vague about financing, or who makes everything conditional on uncertain arrangements, signals a high risk of failure along the way.

Financing conditions everything else: an excellent project without financing does not materialise. This is why we examine it early, without making it a prerequisite to any discussion. In the path described by the public bodies, the definitive confirmation of financing comes rather after the acquisition audit; but nothing prevents, and everything invites, probing the envisaged financing structure from the first exchanges. A structured buyer spontaneously presents a plan consistent with the expected price; an opportunistic candidate dodges the question or keeps deferring it.

One watch point specific to our firm: the origin of the funds. For significant amounts or unusual financing structures, the seller and their advisers stay attentive to the traceability of the capital, in line with the due-diligence obligations that apply to accounting professionals.

Seriousness is also measured by the quality of the written commitments the candidate accepts to make. A precise letter of intent, setting an indicative price, a timetable and the conditions of the offer, marks a real commitment. A serious buyer agrees to formalise their intentions, where an opportunistic candidate stays vague to keep an easy way out.

The normal steps of a sale, such as the signed confidentiality undertaking before access to the data room, are accepted without difficulty by a real buyer. It is precisely this confidentiality undertaking that the public bodies present as the seller's first protection before any sharing of detailed information. A reluctance to sign these basic acts is a warning sign. The letter of intent structures the rest of the discussions, sets the scope of any exclusivity and naturally filters out undetermined parties.

Beyond money, the human profile and the project matter for success and continuity. Experience consistent with the activity, or solid management skills, reassure about the buyer's ability to run the company. A clear motivation, built around a project for the company and not only a financial opportunity, is a good sign, especially for a seller attached to the continuity of their work, their teams and their client relationships.

The consistency between the discourse, the project and the means is often more telling than any isolated argument. A candidate who knows the trade, asks the right questions about the order book and customer concentration, and reasons as a future operator rather than a mere buyer of a balance sheet, shows a real intention to take over.

Here is the full grid, from the most discriminating to the most secondary. No single criterion decides; it is their combination that qualifies a candidate.

Criteria 1 and 2 are eliminatory: a candidate without financing or refusing any written commitment does not deserve the opening of the data room. Criteria 3 to 5 refine the sorting. Criteria 6 to 8 emerge over the exchanges and confirm or not the initial impression.

Sorting is often done by instinct. The table below puts words on the gaps, to make the decision objective and share it with your advisers.

Our view: sort on financing and the written word, before opening the accounts#

Assessing a buyer means protecting your time, your confidentiality and the value of your company at once. An unfinanced or uncommitted candidate can tie up months of discussions for nothing, while accessing sensitive information that can later circulate. Our advice is simple: rely first on the confidentiality undertaking, the protection the public bodies highlight, then add your own sort on financing and written commitment, before opening the data room and going into the detail of the figures. The letter of intent and the confidentiality undertaking are excellent filters: a real buyer accepts them, a curious one turns away, in line with the preparation we describe in our articles on the choice of sale method.

The underestimated risk: a poor buyer weakens the net price#

The seller focuses on the headline price. Yet a candidate who is financially fragile will later negotiate conditions precedent, staged payment or an extended seller's loan, which shift part of the risk onto the seller. Conversely, a solid buyer secures payment and limits review clauses. Selecting the candidate is therefore not just a comfort: it directly affects the net price received after tax and the likelihood that the representations and warranties are one day triggered against you.

A seller had opened his accounts to an enthusiastic but evasive candidate on financing. After several weeks of discussions and access to sensitive information (margins, key contracts, organisation), the candidate never produced a bank agreement and disappeared. The seller had lost a quarter and exposed his confidentiality.

For the following contacts, he reversed the order: confidentiality undertaking first, then verification of financing capacity and letter of intent, before any detailed access. This sequencing ruled out two curious parties from the first exchanges and brought out a credible buyer, already supported by a lawyer and a banker, with whom the operation closed. The lesson learned: the order of the steps matters as much as the criteria themselves.

In practice: qualifying a candidate in six reflexes#

• Have a confidentiality undertaking signed before disclosing any detailed figure.
• Ask early for the financing elements: contribution, agreement in principle, identity of lenders or investors.
• Require a written, dated letter of intent, with indicative price, timetable and conditions.
• Check the consistency between the discourse, the sector experience and the announced means.
• Identify the buyer's advisers (lawyer, accountant, banker): their presence is a mark of seriousness.
• Open the data room and launch due diligence only after these checks, with the support of your chartered accountant.

Three topics, less visible in the first exchanges, deserve a closer look with your lawyer and your accountant, because they weigh on the safety of the operation.

• The weak signals of the first meetings. A candidate who keeps asking about your clients, your prices or your know-how, without ever mentioning financing or a project, may be seeking competitive intelligence more than a buyout. Likewise, a complete lack of sector experience, combined with a generic pitch, justifies dosing the information you release and asking for references.
• Restrictive covenants and non-compete. A serious buyer raises early the question of your handover, of a possible non-compete clause and of the seller's presence commitments. These clauses, to be framed with the lawyer, protect the buyer but may also tie you down for a long time: their scope, duration and consideration are negotiated, not imposed.
• Your seller's tax position, in parallel. The quality of the buyer does not remove the need to anticipate your own exit. The sale method, the timetable and the chosen structure affect how the capital gain is taxed: this framing is prepared upstream with your accountant, not once the protocol is signed.

• The highest price is not always the best offer: a lower bidder who is financed and committed secures the operation more than a fragile higher bidder.
• Confidentiality is protected in writing and in tiers: release sensitive information only gradually, as seriousness is confirmed.
• A competitor may pose as a buyer to collect strategic information: be doubly cautious about client contracts and margins.
• Exclusivity granted too early or for too long ties the sale to a single candidate: frame its duration in the letter of intent.
• The candidate's stance on the representations and warranties is telling: a constructive discussion signals a healthy transaction, disproportionate demands an unbalanced power relationship.
• Anticipate the tax side: poor framing can be costly, as our analyses of the tax mistakes of the selling owner recall and, where the structure justifies it, the use of a holding company.