The Illusion of the Obvious Purchaser

Why Selling to the Obvious Purchaser Often Falls Short and How to Truly Maximize Value

When preparing for a sale, private companies often gravitate toward the “logical” purchaser, typically a direct competitor or company entrenched in the industry. It may seem intuitive and efficient. However, it rarely delivers the best outcome. In reality, competitor-led transactions in the private markets often underperform, leaving meaningful value on the table. Understanding why is critical for any company aiming to unlock full strategic and financial value.

Competitor Synergies Rarely Justify Premiums

Deals in the private markets with direct competitors tend to be driven by customer consolidation, headcount reduction, and back-office overlap. These efficiencies may justify a transaction for the purchaser, but they rarely command a premium valuation. The acquirer plans to harvest those gains post-close. The seller often gets sidelined from sharing in the upside.

In our experience, the most compelling valuation outcomes have come from purchasers seeking to enter new markets with difficult barriers to entry. These purchasers are focused on acceleration and scale, not minor efficiencies.

Special Purchasers Create Real Value

Contrast this with the “special purchaser,” a party that sees the acquisition as transformative. Whether it's market access, proprietary technology, or a strategic leap forward, these purchasers transact based on long-term value creation, not short-term savings. The result is greater competitive tension and premium outcomes.

Bilateral Deals Lack Competitive Pressure

Selling directly to a competitor often removes one critical element: competition. These purchasers typically expect exclusivity. Without a structured process, sellers forfeit negotiating leverage. The result is a deal paced and priced by the purchaser with limited control or alternatives.

The Hidden Risks of Selling to a Competitor

Beyond economics, engaging a competitor carries risk. Even under NDA, sensitive information such as pricing, contracts, customer relationships, and key personnel can be exposed. If the deal collapses, that intel doesn’t disappear. Internally, even rumors of talks with a rival can destabilize teams and create distractions with customers and suppliers.

A Better Approach

Maximizing value requires structure. A well-run, advisor-led process expands the purchaser universe to include strategics from adjacent sectors, financial sponsors, international firms, and family offices. By positioning the company around its growth trajectory and strategic relevance, not just its stand alone profitability, companies can attract bidders who see real, differentiated value. That unlocks pricing tension and leverage on terms, timing, and structure.

Conclusion

Selling to a competitor may feel straightforward, but it often leads to the weakest outcomes. It narrows the field, limits valuation, and amplifies risk. The right strategy opens the market and lets competition do the work.