You have received an email expressing interest in acquiring a company.

Who is really behind the email expressing interest in a purchase

Behind a brief email such as "we are reaching out to business owners in your industry with an offer of cooperation" may stand an investor, a strategic buyer from the industry, an advisory firm looking for a mandate, or a competitor who wants to find out how the company works from the inside. It is impossible to distinguish between them at first glance, and that is precisely why the first response should ascertain identity, not reveal information.

A serious prospect will answer specific questions without hesitation. Which company or fund is behind the inquiry, who specifically is acting on behalf of the prospect, what is the prospect's investment or acquisition profile, and why they approached this particular company. If the response remains evasive or generic, it is the first signal that this is more of a broad market survey than a specific interest.

An advisory firm looking for a mandate behaves differently than a real buyer: it offers help with preparing the sale in exchange for a future commission, not an immediate purchase. An investment fund, on the other hand, usually has a publicly traceable history of investments in the industry, which can be verified before starting to discuss anything with them.

A strategic buyer from the industry is a category where caution is most warranted, as the same company can be both a potential buyer and a direct competitor. A competing business with the resources for an acquisition has the motivation to buy smaller players in the market as well as the motivation to find out how they operate without ever completing the transaction. It is impossible to distinguish between the two motivations from the first email alone, and therefore inquiries from one's own industry are approached with greater caution than inquiries from financial investors outside the industry.

The fourth category that owners encounter increasingly often in practice consists of blanket inquiries sent to dozens of companies at once using an automated tool, without the sender having any real interest in the specific company. Such an inquiry is revealed by a generic greeting without the owner's name, the absence of a specific reason why this particular company was approached, and often grammatical or formatting errors typical of mass-generated text. A brief formal response is sufficient for such an inquiry; investing time in a detailed background check of the prospect is only worthwhile when the other party answers specific questions substantively and within a reasonable timeframe.

What not to send until a non-disclosure agreement is signed

A safe rule of thumb is: until the prospect signs a non-disclosure agreement, they do not receive non-public sensitive information that they could exploit, even if the transaction never takes place. This includes financial statements in any form, customer or supplier lists, price lists and margins, internal organizational structure, details about technology or production processes, and any information about specific employees key to operations.

The first exchange of information should be limited to what is publicly available or what will not harm the company in any way if it falls into the hands of competitors: the field of business, approximate size by order of magnitude of turnover, length of time on the market, or a brief anonymized company profile and the reason why the owner is considering a sale at all. Everything beyond this scope must wait for a signed non-disclosure agreement.

A detailed template of a non-disclosure agreement with commentary on what it should contain and where the most common mistakes are made is offered in the article on NDA with lawyer's commentary. However, a general template downloaded from the internet is not sufficient for a company sale – it must anticipate that the information the prospect receives will gradually deepen, leading up to sensitive data from financial due diligence.

A well-structured non-disclosure agreement typically includes a contractual penalty for breach, because without it, the owner would have to prove the specific amount of damage in any potential dispute, which is often difficult with leaked business information. If a penalty is agreed upon, the creditor may demand it regardless of whether they suffered damage as a result of the breach of duty (Section 2048 of the Czech Civil Code); the amount of the penalty should correspond to how sensitive the information being protected is, rather than being set as a flat rate based on a template from the internet.

However, there are two rules related to an agreed penalty that are often forgotten when drafting an NDA. If a contractual penalty is agreed upon, the creditor is not entitled to compensation for damages arising from the breach of duty to which the penalty applies (Section 2050 of the Czech Civil Code); if the owner wants full compensation for damages in addition to the penalty, they must explicitly agree to this in the contract. Furthermore, a disproportionately high penalty can be reduced by a court upon the debtor's motion, so even a flat-rate, excessive amount will not increase protection.

The second mistake is sending materials all at once, instead of scaling their scope as the prospect's seriousness gradually increases. A reasonable sequence begins with an anonymized company profile, continues with basic financial indicators after the signing of a non-disclosure agreement, and only during actual due diligence are detailed contracts, payroll data, and operational documentation opened up. Furthermore, payroll data involves employees' personal data, the protection of which is not addressed by a non-disclosure agreement alone, so they are usually provided in summary or anonymized form.

Why not to rush with your own price expectations

An owner who names a specific amount at the first meeting may narrow their negotiating space before negotiations on terms even begin. A number communicated too early creates a reference point to which the buyer returns in subsequent negotiations – even if they themselves would have been willing to offer more. An exception is when the seller communicates price expectations intentionally, for example, as a filter to deter prospects without real capabilities.

In a managed sales process, it is common to first request an indicative non-binding offer from prospects, usually after an initial introduction to the company. Only on this basis does the owner decide whether it makes sense to proceed to a deeper phase of negotiations and open up further information. The advantage of this sequence is that the owner sees how the prospect values the company themselves and can compare multiple offers against each other.

If the owner is nevertheless asked about price expectations, it works better to answer with a range derived from industry multiples or by referencing that the exact value must be determined by a professional valuation after due diligence, rather than giving a specific number off the cuff. Moreover, the number the prospect ultimately offers is far from the amount the owner will see in their account – standing between them are net debt, working capital adjustments, and potential escrow, which is discussed in a separate article in this edition.

What protects you even if you do not have an NDA yet

The obligation to protect confidential information from negotiations does not stem only from a signed non-disclosure agreement. If a party obtains confidential data or communication about the other party during contract negotiations, they shall ensure that it is not misused or disclosed without a legitimate reason, and if they breach this obligation and enrich themselves thereby, they shall surrender to the other party what they enriched themselves by (Section 1730 of the Czech Civil Code).

However, this statutory protection is significantly weaker than an explicit NDA for three reasons, and therefore should not be relied upon as a substitute for a signed agreement. The law here explicitly grants the right to the surrender of enrichment, not a pre-agreed contractual penalty; other claims are only considered if the conditions of other protections are met, typically trade secrets or unfair competition. The burden of proof lies with the injured party, who must prove that the disclosure actually occurred and that the information was confidential. Furthermore, there is no definition of what the parties consider confidential.

In addition, some information may enjoy separate protection as a trade secret if it consists of competitively significant, identifiable, valuable, and in the relevant business circles normally unavailable facts related to the business, the confidentiality of which is ensured by its owner (Section 504 of the Czech Civil Code). Typically, this involves precise parameters of a production process, a price structure negotiated with specific customers, or a detailed list of suppliers with terms of cooperation.

If a person who learned of such information during purchase negotiations discloses it to another competitor, or uses it themselves for the benefit of a competing business, this constitutes a breach of trade secrets as a form of unfair competition under Section 2985 of the Czech Civil Code. Depending on the circumstances, the owner may demand that the infringer refrain from such conduct and remedy the defective state, as well as seek reasonable satisfaction, damages, and the surrender of unjust enrichment.

Even this protection requires the owner to prove that the information actually met all the characteristics of a trade secret and that they themselves kept it confidential in an appropriate manner. The Supreme Court points out that the intent to keep information confidential can be manifested through contracts, confidentiality commitments, internal rules, as well as factual concealment, and that what matters is whether the characteristics are met during the relevant period (resolution File No. 23 Cdo 2736/2024). Marking materials as confidential is therefore one piece of evidence that the owner ensured confidentiality; it is not sufficient on its own, as the overall protection regime is decisive.

How to recognize that it might be a competitor's reconnaissance

Certain patterns in what a prospect asks and does not ask can point to a competitor's reconnaissance under the guise of a purchase. Prospects assessing an investment are usually first interested in financial results, ownership structure, reasons for the sale, and the timeframe in which the owner wants to close the transaction – i.e., information they need to decide whether to proceed with negotiations.

A warning sign is when questions right at the beginning target operational know-how directly: specific technological processes, terms with key suppliers, names of main customers, or pricing strategy towards specific market segments. In a real strategic acquisition, such questions may be legitimate, but they belong to a later and controlled phase; in the beginning, they are valuable to a competitor regardless of whether the transaction takes place at all.

Another signal can be an unwillingness to accept any reasonable protection of confidential information. Comments on the specific wording of an NDA are common in transactions – a prospect may have legitimate reservations about an overly broad definition of confidential information, the duration, or the amount of the contractual penalty. What is suspicious is rather the refusal of confidentiality as such or an effort to narrow it down so that it protects practically nothing.

The final signal is the pace that the inquiry gathers right at the beginning. A serious acquisition has its natural rhythm: initial introduction, signing of a non-disclosure agreement, provision of basic documents, and only then a non-binding offer. A prospect who pushes for the immediate delivery of detailed financial statements before the two parties have even met either does not know the process or is precisely interested in obtaining information quickly without any intention of buying anything.

How to respond to the first email step by step

The first step is to verify the prospect's identity before responding to anything substantive: the name of the company or fund, its publicly available transaction history, and whether the email came from a real corporate domain, not a generic email inbox. A quick check in the commercial register, media, and professional networks will reveal most blanket and untrustworthy inquiries before they are even answered.

The second step is a brief response asking for a closer introduction of the prospect and their intent, without revealing anything about the company itself. A typical response will confirm openness to negotiations and request information about the prospect, their motivation, and a framework idea of the transaction structure.

At this stage, a general question about the anticipated schedule and whether the prospect is acting alone or on behalf of a group of investors is also worthwhile. The answer to this question will hint at how quickly things will proceed and how many people will have access to sensitive information when further rounds of negotiations open.

The third step, if the prospect is trustworthy after the first round, is to sign a non-disclosure agreement before sending anything else. Only after it is signed does the gradual opening of information follow: first an anonymized profile and basic financial indicators, then more detailed documents in proportion to how the prospect demonstrates real seriousness, typically by formulating a non-binding offer.

The fourth step is deciding whether to involve an advisor in the process at this stage. For smaller inquiries, this may not make sense, but for serious interest with a specific offer, it pays to have a lawyer on hand from the start to coordinate communication, monitor what leaves the company and when, and prevent the owner, in their excitement over the first offer, from revealing more than they should. A broader overview of the entire sales process from first contact to settlement is provided in the article on company acquisition and sale.

The fifth step, if the prospect actually submits a non-binding letter of intent after signing the non-disclosure agreement, is to verify whether the document contains more than just the price. The term sheet should also define the transaction structure, the anticipated schedule, the conditions under which the prospect can withdraw from the offer, and whether and to what extent the document binds the owner even before the purchase agreement is signed. What exactly a term sheet should contain and when it becomes binding is described in the article on the phases of a company sale from the letter of intent to settlement.

Risks of first contact with a prospective buyer

Summary

The first email expressing interest in buying a company decides whether the contact will lead to serious negotiations or a free leak of information to competitors. Until the prospect signs a non-disclosure agreement, they should not receive non-public sensitive information about the company, and until the owner finds out who is behind the inquiry, even a general discussion about business details should not be opened.

For a business owner, this leads to one rule that is worth keeping regardless of how promising the first contact looks. The proven sequence of steps is identity verification, a brief response without revealing information, signing a non-disclosure agreement, and only then the gradual opening of documents in proportion to how the prospect's demonstrated seriousness grows.

The lawyers of the Prague-based ARROWS advokátní kancelář prepare non-disclosure agreements tailored to the specific transaction, verify the identity and seriousness of prospects, and coordinate communication from the first email to the closing of the transaction. The firm also connects clients looking for an investor or buyer with those offering such opportunities. A deeper overview of the entire company sales process is offered in the book How to Sell a Company.

Write to us at consultation@arws.cz or review our practice for company sales and transaction advisory.