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I have seen business owners frozen by fear.  The thought that their customers, competitors, or employees might find out that they are considering a sale, is sometimes so overwhelming that the business owner does nothing at all.  Even worse, they may consider selling their business “quietly” to a friend or neighbor to keep it as confidential as possible.  Confidentiality is important during the sale process and when your investment banker tells you that it is also important to run a process that involves multiple parties, confidentiality may seem impossible.

shutterstock_534111937.jpgWhy is confidentiality important?
  1. If your competitors find out that you are for sale, they can use that to sell against you
  2. If your customers find out that you are for sale, they can have doubts about your stability and ability to service them going forward
  3. If your employees find out that you are thinking about a sale, they may begin to look for other jobs
There are ways to have your cake and eat it too as it relates to confidentiality.
  1. Put a real confidentiality agreement in place. Do this before you have any kind of meaningful conversation.  Your investment banker or your lawyer can help you with this.  Any real, interested buyer will not have a problem signing this document.  Generally, we like to include a “no hire” provision in our confidentiality agreements as well.  This prohibits the buyer from saying “no thank you” to the transaction, but proceeding to make an offer to your plant manager one week after receiving the company’s information.
  1. Move quickly. Once you begin the sales process, you will want to move as quickly as possible.  This will require some preparation on your part and will be enhanced if you are using the services of an investment banker.
  1. Go to the right buyers. Going to multiple buyers is incredibly important to increase purchase price.  You must make sure you are going to the right buyers though.  If you went to the supermarket and advertised your metal bending company for sale, you might have a couple of interested parties who look through your information, but it is unlikely that you will find your buyer.  The right group of buyers means that your investment banker should spend a good deal of time creating the list of parties with whom you are comfortable sharing the information.  This should be done before you contact anyone. 
  1. Don’t send out an email, a mass mailing, or advertise your business for sale on a website. This may seem old fashioned, but any business of size should have direct contact between a potential buyer and the investment banker.  In calls with potential buyers, a skilled investment banker can ascertain without mentioning anything about the business for sale, whether that buyer is looking for acquisitions, what areas of their business they are looking to grow, or if there is a particular geography that is important.  By asking the potential buyer a couple of questions, you may be able to rule them out before you have shared any information at all, completely preserving confidentiality while fine tuning your buyer list. 

Confidentiality around your transaction is not something to take lightly.  However, there are ways to manage your risks around the news of the sale leaking.  Don’t let your confidentiality concerns stop you from making progress. Check out our Seller's Corner for more advice on how to get more out of the most important sale you will ever make.

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