The perceived wisdom is the only reason one firm puts its hands up to another is that it is on the verge of trouble; not a very promising way to begin. This isn't to say that you may not have good reasons for casting your net around. Perhaps you are seriously ill or due to retire, want to emigrate, need to fund development or extend your distribution, or the other firm holds the nut while you hold the bolt. Not all of these warrant yielding control.
The most common way to approach a potential buyer is to drop hints to a well-placed, common acquaintance. With luck, he will sow the idea in his boss's mind so the other fellow thinks he is approaching you. Astutely done, this keeps all your cards in your hand. However, being devious doesn't mean being unscrupulous. It is unfair and dishonest to ask your contact to do anything that is not in his best interest. Incidentally, if any member of the other side questions you about your relationship you must be frank even though you play it down.
If they ask you why you want to give up, you must be direct. Draft your case in writing even if you are going to give an answer verbally. It is essential that your response makes business sense. If you have to take the initiative with their CEO (deal only at the highest level), don't talk about a takeover. Talk "mutual business." Sound intellectually exploratory.
A more interesting angle is to make your approach to more than one firm. Then you are not selling, you are exploring all possibilities. You can say, "My board has always had a great respect for yours. I was wondering whether we should meet to discuss a more constructive proposition."
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