Almost every business owner asks me what they can do to maintain confidentiality during the sale process. Here's my advice ...
There are several defenses business sellers can implement to minimize the potentially damaging public exposure to customers, competitors, employees, and suppliers because the business is for sale. The first and most important measure is to hire a professional intermediary to represent you.
Discuss confidentiality concerns with your advisor and ask what precautions they take when interviewing prospective buyers. Thoroughly understand the marketing methods that will be used and review all marketing materials. Ask the intermediary how they qualify prospective purchasers and when information about the company will be released. Know who you are dealing with and insist on confidentiality.
Limit the amount of time the company is on the market – the longer the firm is available for sale, the higher the chances for breach of confidentiality. The industry average time to sell a business is fifteen months, but a company that is properly priced, packaged and professionally represented can sell within four to six months.
Have a script in place should the word get out that you are considering a sale - an example might be "We are looking for additional financing to expand the business." Invite your customers, suppliers, bankers and friends to tour the business and get employees used to strangers walking through the company. This is a very effective diversionary tactic when you tour with potential buyers.
Most buyers like to see what they are acquiring before they close but this can be done after hours or under the pretense of a visiting friend. I'm an advocate of conducting sale negotiations and due diligence at my office and away from the business. This way there is less disruption to the business and it gives the seller the opportunity to talk openly and frankly about the company without employees or customers' knowing the business is for sale.
Buyers typically sign confidentiality and non-disclosure agreements, but it is very important to constantly remind them of the privacy of the discussions. Remind potential buyers that it is in their best interest to maintain the continuity of the business by limiting unnecessary exposure.
Written by Mark Richardson for the Business Brokers Network National Training Conference