More Bidders Does Not Necessarily Mean More Competition

Every seller wants competition.

Few sellers stop to ask whether they are creating genuine competition or simply creating a crowded process.

One of the most persistent myths in M&A is that more bidders automatically lead to better outcomes. The logic appears compelling: if ten parties are interested in acquiring a business, the seller should achieve a higher valuation and better terms than if only three parties are at the table.

In practice, however, some of the most successful transactions are not those involving the largest number of bidders. They are those involving the right bidders.

As M&A activity continues to accelerate across the GCC, founders, family businesses and shareholders are increasingly encouraged to pursue broad auction processes. The underlying assumption is simple: more participants create more competition, and more competition creates more value.

Sometimes that is true.

Often, it is not.

Interest Is Not the Same as Competition

One of the most common mistakes sellers make is confusing interest with competition.

A large number of parties may sign NDAs, attend management presentations and submit preliminary indications of value. Yet many of those parties were never realistic buyers to begin with.

Some lack the financial capacity to complete a transaction of the relevant size. Others struggle to obtain internal approvals. Strategic acquirers may change priorities. Financial sponsors may be unable to justify valuation expectations.

What begins as a process involving ten interested parties can quickly become a negotiation involving only one or two credible buyers.

By that stage, much of the perceived leverage may already have disappeared.

We have seen transactions where an initial bidder universe of more than twenty parties ultimately produced only two credible offers, while other transactions involving a handful of carefully selected buyers generated significantly stronger outcomes.

The difference was not the number of participants. It was the quality, relevance and commitment of those participants.

Genuine competition is created by credible alternatives, not by crowded processes.

Valuation Is Only Part of the Equation

This distinction becomes particularly important when evaluating deal certainty.

Many sellers naturally focus on headline valuation. Yet experienced dealmakers understand that value is not measured solely by price.

A higher offer is of little benefit if the buyer cannot secure approvals, obtain financing, complete diligence or negotiate definitive documentation.

In many transactions, the most attractive bidder is not the party offering the highest price. It is the party most likely to reach closing.

The Real Objective

For sellers considering a transaction, the objective should be clear.

Do not focus on maximising the number of bidders around the table.

Focus on identifying the buyers most likely to value the business appropriately, remain engaged throughout the process and successfully complete the transaction.

The distinction may appear subtle. In reality, it can be worth millions.

The strongest auction is not necessarily the one with the largest room. It is the one with the right people in it.

Rindala Beydoun

Managing Partner