Reaching Out to a Searcher - Competitor for Market Insights: Worth It?

intern profile

December 05, 2024

by an member from University of Washington in Mount Vernon, WA, USA

We are exploring the acquisition of a company (currently negotiating on the LOI). In the meantime, we discovered a competitor in the space, based in the exact same small town, who looks much bigger (probably 10x in revenue) and was purchased by another searcher a couple of years ago.

It is tempting to reach out to this person and ask for advice about the local market and the industry as well as uncover some unknown unknowns. The obvious risks we are seeing are:


We won't share the name of the target company, but the small bits we will share may be enough for them to guess which business is for sale due to market familiarity and we want to follow our NDA.

If we do end up buying the company, it may be tricky to ask them for advice and then use it to compete. However, it is also possible that they are in different niches and we won't overlap.
We also may be just bidding against each other for this company.


What are your thoughts? I want to make sure we behave in an ethical way here, but also don't want to miss out on a great information source just because we haven't looked from the right angle.
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commentor profile
Reply by a searcher
from Babson College in Bethesda, MD, USA
It seems that being transparent and receiving accurate information could be mutually exclusive. If you are transparent, they will have an incentive to provide inaccurate or skewed information. For example, if they are bidding on the business, they will give you information to cause you to reduce your offer. If they are not bidding on the business but they view you as a potential future competitor, they could provide information in a way that discourages you from proceeding. I think if you end up being transparent, you need to be suspicious of anything you learn.
commentor profile
Reply by a searcher
from Stanford University in North Carolina, USA
As long as you remain transparent in your intent, avoid discussing specifics about the company or regional dynamics (which could inadvertently reveal your target), and focus your questions on the broader market and the searcher’s general experience, this approach could work. That said, it’s essential to carefully review the NDA to ensure full compliance. Ultimately, trust your instincts—if the conversation doesn’t feel appropriate or doesn't align comfortably with your ethical standards, it’s better to err on the side of caution!
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