Acquisition: Indicative bid

What to consider when making an indicative bid

In connection with business acquisitions Indicative bid is an important step in the process and provides a basis for further negotiation between buyers and sellers. An indicative bid is non-binding and provides an initial formal indication of interest and valuation of the target company, as well as clarifying the terms and assumptions of the deal. In this article we will go over how an indicative bid can be formulated and what essential elements should be included.

What parts should be included in an indicative bid?

A well-formulated indicative bid should include the following elements:

1. Description of the buyer company

• Presentation of the buyer company: Include a brief description of the buyer company, its business, size and market position.
• The rationale behind the acquisition: Explain why the buyer company has an interest in acquiring the target company and how it fits into the buyer's long-term strategic goals. This may include synergies, market expansion or technological advantages.

2. Valuation and commercial terms

• Rating: Describe how the target company is valued as well as the main underlying assumptions.
• Purchase Price Structure: Indicate how the purchase price is structured, such as cash payment, additional purchase price, seller's reverse, etc., as well as the proportion of the company to be acquired.
• Possible reinvestment: If there are plans for the seller to reinvest in the buying company or to remain a shareholder in the target company, this also needs to be stated.

4. Future plans

• Strategic plans of the target company: Describe the buyer's future plans for the target company after the acquisition. This may include plans for growth, expansion, product development or restructuring.
• Integratie: Specify how the target company will be integrated into the buyer company's existing operations.

5. The role of the seller

• Clarification of the role of the seller: Describe the role the seller is expected to have after the transaction has been completed. This may include continued operational work, advisory roles, or other specific commitments.

6. Due diligence

• Description of the due diligence process: Describe how the due diligence process will be carried out. This should include a timetable, which areas will be reviewed (financial, legal, operational, etc.) and which parties will be involved.

7. Other conditions

• Other conditions: Here, for example, exclusivity requirements and other conditions may be specified

An indicative bid is an important milestone in the acquisition process. It gives a formal indication of the buyer's interest and valuation, as well as clarifies the terms and assumptions of the deal. A well-worded indicative bid clarifies expectations and conditions for proceeding with the deal and lays the groundwork for continued negotiations and an expedient due diligence process.

At FLB Partners, we offer expertise and support throughout the acquisition process, from strategic planning to integration. Contact us today to discuss how we can help your company with the acquisition process.