Do companies get bought or sold?

What really happens when you wait for the business equivalent of the millionaire neighbor from the penthouse to show up.

There’s a phrase you’ve probably heard at some point: “Companies are bought, not sold.”

It’s usually used to defend the idea that the best way to sell a company is not to put it up for sale, but rather to wait patiently for a buyer to appear. According to this view, if you remain calm long enough, someone especially interested will show up one day and offer you a higher price than you would get by actively going to market.

This way of looking at it is built on three very specific assumptions:

The right moment to go out and sell is not decisive.
If you wait long enough, a buyer willing to pay an extraordinary premium will appear.
Showing little interest in selling puts you in a stronger negotiating position.

Assumption 1. Timing doesn’t matter

This assumption comes from the perception that the market is always the same and that if a company is attractive, buyers will show up at any moment. It’s a way of thinking that ignores how much activity, valuations and appetite to buy change over time.

In reality, timing depends on a combination of factors. There are moments when a sector enters a consolidation phase and several buyers are active, and others when activity slows down. The economic cycle also plays a role, because it affects the cost of capital, investor appetite and overall confidence. And then there’s the moment your own company is in — it may be growing with good visibility or going through a more difficult year.

These variables rarely move at the same pace. Sometimes your company is having a great year but the sector is cold. Or the market is very active but you’re not at your best. Choosing when to go out means looking for a point where several circumstances align reasonably well — something that usually doesn’t happen if you simply wait without doing anything.

Even if that ideal buyer everyone talks about existed, their best moment to buy doesn’t necessarily coincide with your best moment to sell. They may show up just when your company is less prepared or when the market is turning downward.

Also, waiting is risky. A company’s context can change in less than a year: losing a major customer, the entry of an aggressive competitor, a regulatory change or a financial year that doesn’t go as expected. Many companies lose great momentum because they don’t make a move when conditions are in their favor.

When someone decides to sell their apartment, they don’t rely on a stranger showing up at the building entrance with an unexpected offer. They call a couple of agencies, prepare documentation, take photos, publish on Idealista and Fotocasa and start generating interest. It’s the natural way to sell something when you truly want to sell.

Assumption 2. If I wait long enough, a buyer willing to pay an extraordinary premium will appear

This assumption is very tempting. We’ve all had a similar conversation with a friend:

— I love my home, I’m really comfortable here.
— And what if someone offered you two million?
— For two million, of course I’d sell it — it’s worth, at most, one million.

What that response reflects is that, even though the home is not for sale, there may be a very specific case in which someone is willing to pay a completely off-market price.

Imagine a 250 m² apartment on the second-to-top floor in Madrid’s Barrio Salamanca, overlooking El Retiro, right below the penthouse of a Mexican multimillionaire who’s been wanting to combine both properties to create a huge duplex. That buyer has such a specific motivation that doesn’t exist for anyone else and is willing to offer 10 million euros for a flat that would normally sell for 5 million (don’t come after me if I’m off with the valuation — real estate is not my specialty).

But these cases are extraordinary. For them to happen, several things need to coincide: a unique location, total lack of comparable alternatives, a buyer with almost unlimited resources and a very special motivation. And even then, in such circumstances, that buyer may not even consider calling you. Not everyone takes the initiative to call a neighbor, no matter how wealthy, and make them an offer they can’t refuse.

Now imagine something more common. A 100 m² flat in Barrio del Pilar, Madrid, on a first floor. It has value and some scarcity (it’s still Madrid), but it’s certainly not unique. It’s not going to happen that — simply by waiting — someone will show up offering an extraordinary amount. There isn’t high scarcity, nor urgency, nor a particular motivation that would lead someone to pay a significant premium. If you don’t put up the “FOR SALE” sign and publish it on real estate platforms, the likelihood of selling it is very low.

The same happens with companies. Most are not the business equivalent of the 250 m² Salamanca apartment with Retiro views and a uniquely motivated buyer upstairs. Most are more like the flat in Barrio del Pilar: valuable, interesting companies, but not so unique that a buyer will spontaneously appear with an off-market offer.

Significant premiums don’t emerge from waiting passively. They arise when multiple buyers are interested at the same time and there is a real competitive dynamic.

Assumption 3. Showing indifference puts you in a stronger negotiating position

This assumption comes from the idea that if you show little interest in selling, the buyer will interpret it as strength and improve their offer. It might sound convincing, although experience shows the opposite.

Professional buyers tend to lose interest when they perceive that founders or shareholders are not truly committed to a process. They have limited teams, many deals to analyze and low tolerance for ambiguity. They prefer to focus their time on companies that are prepared, with organized information, non-core assets separated, contracts reviewed and clear metrics. When they perceive clarity, they move forward. When they perceive indifference, they move on to another opportunity.

What really generates competitive pressure is not disinterest, but the competitive process itself. When you go to market in an organized way and contact different buyers:

you’re more likely to find the one who is at their best moment,
the chances increase that at least one buyer has strong synergies,
and statistically you have far more options of finding the ideal buyer if you contact several potential acquirers rather than just one, right?

And when several buyers know they’re not alone, something much more powerful than the “I’m not interested” strategy emerges. For them, it’s not only the opportunity cost of not acquiring your company, but also the real risk that a competitor does acquire it and strengthens their position at your expense. That possibility creates urgency, more concrete offers and much more decisive behavior.

Competition among buyers isn’t activated because the seller appears indifferent, but because the process is clear, the timing is defined and buyers feel they’re competing.

Companies are bought, not sold

The idea that “companies are bought, not sold” can be true in exceptional cases like the Salamanca flat and the penthouse neighbor who dreams of combining two properties. These scenarios are possible — but very rare and hard to identify in advance.

For most companies, maximizing price means choosing the right moment, preparing the company, going to market when the context is favorable and creating a real competitive dynamic among several buyers.

Relying on the hope that one day the business equivalent of the millionaire from the penthouse will show up is usually a strategy far too dependent on luck — and one that almost never produces results comparable to a well-run process.

By Joshua Novick, partner at Bondo Advisors

Source https://www.joshuanovick.com/p/las-empresas-se-compran-o-se-venden