The Importance Of Confidentiality When Selling A Business

Selling a business can be a sensitive and complex process. It requires careful planning and execution, and one of the most critical aspects is keeping the sale confidential.

Confidentiality is essential to avoid damaging the business's reputation, disrupting operations, or causing anxiety among employees, customers, and suppliers.

There are four essential reasons why confidentiality is necessary these include:

Maintaining the value of the business: If news of the sale becomes public, it could create a negative perception among customers, suppliers, and employees, which could harm the value of the business.

Protecting sensitive information: The sale of a business requires disclosing sensitive financial and operational data to potential buyers. If this information gets into the wrong hands, it could harm the company.

Preventing employee anxiety: If employees learn about the sale of a business, they may worry about their job security and start looking for other opportunities. This could disrupt the operations of the company and harm its value.

Minimizing supplier and customer concerns: If suppliers or customers learn about the sale, they may worry about the continuity of their relationship with the business. This could lead to a loss of business or supply chain disruptions.

Here are seven tips for keeping the sale of a business confidential:

Limit the number of people who know about the sale: Only a few people should know about the deal - or "in the tent" - including the owner, broker, attorney, and sometimes the CPA. If certain employees need to be involved in the process, having them sign a non-disclosure agreement is a good idea.

Choose a trustworthy broker: Choose a broker who has extensive experience in selling businesses and has a proven track record. Do not hesitate to ask any questions regarding confidentiality – veteran advisors will be very knowledgeable on the subject and explain the intricacies.

Restrict access to sensitive information: Only share sensitive information with potential buyers who have signed an NDA. It is also essential to limit the information provided to what is necessary to evaluate the business's value. Virtual Data Rooms are vaults that track what has been looked at and when they can be a great tool once the diligence stage has reached.

Be careful with online communication: Be cautious when discussing the sale of a business online or through email. Hackers can access email accounts or company networks and leak sensitive information.

Monitor employees: Monitor employees' access to information and communication to prevent leaks or accidental disclosures. If employees have access to your calendar – make private calls and meetings about the sale.

Possible use of a code name: Use a code name for the business to prevent potential buyers from discovering the business's identity.

Control the release of information once the deal is final: Control the release of information to the public and media by issuing a carefully crafted press release.

In conclusion, keeping the sale of a business confidential is crucial to protect its value, reputation, and operations. Sellers need to take several precautions to maintain confidentiality, including limiting access to information, using code names, and controlling the release of information. By following these tips, business owners can ensure a successful sale while minimizing any potential harm to the business.

Author
Haden Buckman
Deal Associate
Benchmark International

T: +1 512 861 3335
E: hbuckman@benchmarkintl.com

Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com

Europe: Michael Lawrie at +44 (0) 161 359 4400 / Lawrie@BenchmarkIntl.com

Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com

ABOUT BENCHMARK INTERNATIONAL:

Benchmark International is a global M&A firm that provides business owners with creative, value-maximizing solutions for growing and exiting their businesses. Benchmark International has handled over $10 billion in transaction value across various industries from offices across the world. With decades of M&A experience, Benchmark International’s transaction teams have assisted business owners with achieving their objectives and ensuring the continued growth of their businesses. The firm has also been named the Investment Banking Firm of the Year by The M&A Advisor and the Global M&A Network as well as the #1 Sell-side Exclusive M&A Advisor in the World by Pitchbook’s Global League Tables.

Website: http://www.benchmarkintl.com
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