Acquirers: How to gauge intent/seriousness of the Target

For any company looking at acquisitions as a strategic tool for growth, one of the biggest challenges is to gauge whether the target company is ‘serious’ enough about getting acquired. I recently spoke to the founder of a listed IT company, who has been spending a lot of dedicated time in exploring acquisition opportunities. The company has been issuing 5-6 term sheets a year for last 4 years, of which only 1 deal in total materialized.

This is a common and critical challenge in M&A, especially in the IT services space where founders often entertain acquisition conversations casually—sometimes as a way to explore valuation benchmarks, career alternatives, or partnerships.

Based on our past experiences, we’ve put together some practical steps and signals to help an acquirer assess the intent / seriousness of a founder/seller:

 1. Ask for Key Information Early

Founders who are serious about selling will usually be willing to share basic but sensitive information under NDA, such as:

• Revenue breakdown (past 2–3 years)
• Client concentration (top 5 clients)
• Org structure and key dependencies
• Profitability / EBITDA margins
• Pending litigations or red flags
• Founder’s personal involvement in delivery/sales

Red flag: If they hesitate or delay repeatedly in sharing this, they may not be serious.

2. Discuss Deal Structure Preferences

Ask about their preferences early:

• Would they be open to an earnout, or do they want a full cash exit?
• Do they want to stay post-acquisition or exit?
• Would they be open to part-equity deals?

Red flag: If the founder is vague, non-committal, or overly idealistic (“only full cash at high multiple, and I walk away immediately”), they’re likely not ready.

3. Time Commitment & Responsiveness

Gauge their seriousness by how quickly and consistently they respond:

• Are they showing up on time to calls?
• Do they revert with follow-ups/documents as promised?
• Are they pushing timelines or making excuses?

Red flag: Repeated reschedules, generic conversations, or delays often mean they’re testing the waters.

4. Motivations for Selling

Ask this question directly:
“Why are you considering a sale now?”

Look for clarity and alignment in motivations:

• Market is consolidating, and they want scale
• Personal reasons (health, burnout, new opportunity)
• Strategic alignment or synergies with your firm

It’s also important to ask if they have engaged in acquisition conversations with other companies, and what was the outcome of those conversations.

Red flag: If the answer is vague, e.g., “just exploring” or “everyone’s getting acquired these days,” they’re not committed.

5. Willingness to Engage in a Valuation Discussion

You don’t need to agree on price immediately—but founders serious about selling will be open to a discussion on:

• Valuation expectations
• Multiples they’ve seen or want
• Flexibility on structure (cash, equity, earnout)

Red flag: If they refuse to talk numbers at all, or if their expectations are wildly unrealistic, it’s a strong sign they’re not serious.

6. Test Intent with Small Diligence Request

Before investing full effort into diligence, ask for a light data room:

• Client contracts (redacted)
• Employee list
• Brief financial model or MIS

Also, see if they are looking to engage a legal team to guide them through the deal process. It would show seriouness on their part.

Serious sellers will be prepared—or will say they’re working on it.

7. Is There a Board or Investor?

If the company has other stakeholders (co-founders, investors, family), ask:

• Have they discussed it internally?
• Is everyone aligned?

Personally, I have asked to be introduced to other board members / investors, so that I can get an alternative perspective of all the stakeholders.

Red flag: If the founder says “I need to talk to others” after multiple discussions, it’s a stalling tactic.

8. Sign a Term Sheet

This is a strong litmus test. Ask if they’d be willing to:

• Enter an exclusivity period
• Sign a non-binding term sheet

If they avoid this or want to keep everything informal for too long, it’s a sign of low intent.

ESV team has been on all sides of the table – an operator, an acquirer, a seller and a consultant. We’ve had excellent success in identfying great acquisition targets, building a trusted relationship with exiting founders and ensuring a successful deal. Ping us if you’re interested in knowing more.