Just wondering is Binding offer typically higher than NBO and by how much? I’m doing a M&A deal and just noticed that binding offers are lower than NBO, which js a bit surprising for me
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Wouldn’t NBO be typically IOI stage? If so, i’d imagine it to be generally higher since you want to make a competitive offer and make the seller excited. Once you’re bid goes through and you have some more time to DD and it’s time for you to LOI / exclusivity (binding), I’d imagine price to go down because they buyers have had more time to “look at the asset” and value it accordingly. That said, if it’s an extremely competitive / attractive asset I could see how price may go up in the 2nd stage.
Just think for 2 seconds here man…
Adding on weaslbee comment, binding offer could be lower than NBO in the case one party has accelerated their process and diligence, and could potentially pre-empt at a lower price and excite management of the target by deliverability. This could make management choose an offer based on deliverability vs price and thus binding offer could be lower than NBO.
However, I'd say that the most common factor on Binding NBO would be new information available post-NBO such as poor trading performance, new information on customer churn, key management suddenly leaving, etc.
Overall, I wouldn't think Binding NBO is that uncommon.
It could be, it couldn't be, it's really circumstance specific. I don't think there is a universal pattern outside of closing adjustments, or maybe I'm just not aware. I've seen issues uncovered during confirmatory and a downward adjustment but after more negotiation. That's why sellers try to keep those timelines tight and the process focused.
From a sell-side perspective, retrading the intial offer is not a good look and obviously not received well by sellers. It's a point of discussion when an offer feels too out there and there is a period of trying to understand intentions. Putting in an LOI costs nothing, it's nonbinding and that's good cover for other things. The one I've seen is competitor fishing for intel with no intention to bid.
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