Confidentiality Critical to Business Sale
prepare to put your house on the market, you get the word out to as many
people as possible. The “For Sale” sign is placed in the front yard, you
invite people into your home during an open house and you put ads in the
newspaper and online. You want everyone to know your house is for sale.
However, that’s not the case when selling a
business. Place an ad that your business is on the market and people start
to wonder. It creates an air of uncertainty that can be detrimental to your
bottom line and put the company in jeopardy.
To increase the
likelihood of a successful sale of a business at an optimum price, keep it
What’s likely to happen if people find out the business is up for sale?
Employees get nervous. They
begin to worry if their jobs will disappear or if they’ll get along with a
new owner. Some may even quit before you have a chance to reassure them and
it will probably be the good employees that leave. They’ll start looking
for jobs that make them feel more secure.
people is serious, particularly during the sale process. Key staff members
provide valuable continuity and business knowledge that buyers are looking
for. Lose them and potential buyers may be lost too.
Customers begin to
wonder. They may become concerned whether the business has
problems that could threaten their supply chain. They may start questioning
if they’ll get the same quality from the new owner.
Competitors will spread the word. Once
the competition finds out, rest assured they’ll let your customers know and
use it as ammunition to bring that business to their company. It opens the
door for them to steal business from you.
creditors may tighten terms. You may be working with terms
of net 45 or more to benefit your own cash flow. But once creditors learn
that the business is for sale, you may find those terms tightening or notes
unexpectedly called due.
On average, a
business sale takes nine months to one year. If even some of these changes
occur early on, the impact can be dramatic. You’ll find that you’re not
only running a business, but you’re busy putting out fires.
A buyer wants a successful operation with few changes until he or she
can make those changes. Too many question marks translate to greater risk
and lower purchase offers.
Confidentiality is crucial no matter the size of the company or the type of
business. One way to maintain confidentiality, use a professional who
understands the process – use an intermediary. An intermediary will market
the business in a confidential manner, while providing just enough
information to attract the buyers you are looking for.
intermediary should be diligent in screening inquiries to be sure
competitors aren’t out there fishing for details. The intermediary should
only be sharing your identity after determining that a potential buyer is
seriously interested and is qualified. Those serious and qualified buyers
should also be required to sign a binding confidentiality agreement that
holds them accountable for leaking information.
to maintain your business as usual for as long as possible. Keeping the sale
confidential until the time is right will help you to minimize uncertainty
and maximize the sale.
© Regelle Partners Inc. 2014