more... about Confidentiality

If you are one that is not so convinced, please allow us to suggest that confidentiality probably will ultimately matter to you. Disclosing confidential information such as, simply, "the company is for sale" or even that the idea is being considered, can be extremely damaging. The effectiveness and profitability of your ongoing business may be impacted by continuing confidentiality or the lack thereof, and confidentiality, or lack thereof, may ultimately affect the value of your company.

When contemplating the idea of selling your business or as you may become engaged in the selling process itself, one should always assume the following (and more) problems can, and will, develop from indiscriminate and untimely disclosure of confidential information.

• Many employees think of their relationship with their employer as a type of marriage. When you tell them you're "thinking about selling" they may hear "you're thinking about getting a divorce" and often, even in good employer-employee relationships, years-long bond and trust can be broken forever.
• Your staff will generally represent a significant portion of your company's value. Employees can become nervous and some may actually leave for what they think will be more stable employment. A buyer can often sense an unsettled or unstable staff situation and can become nervous as well. The buyer may view the company's value as one in decline, and that being the case, may withdraw or reduce the offer.
• Even if selling is a futuristic objective, competent and stable staff will be key to building and maintaining your company's value. Unstable, nervous employees can become unmotivated and uncommitted. Telling some employees you are even thinking about this eventuality can play on their minds and adversely affect their focus, loyalty and work ethic. Such attitudes can cause quantity, quality and other issues that will adversely impact the ongoing profitability of the business, which in turn, will adversely impact the value of the company when selling time arrives.
• You should assume that your competitors will take advantage of any opportunity, including of any knowledge (indeed, any rumor) that the company is for sale. Assume that they will ensure that your customers hear the news as well, and assume that some of these customers are apt to lose confidence and decide to trade elsewhere. Any business decline, between now and the sale date will result not only in diminished profits, but it will result also, at best, in a diminished offer from the buyer.
• Suppliers extending credit to your company may do so because of your good payment habits and dependability over the years. Some suppliers, learning that you are soon going to be gone from the business, may begin to pull back, not wanting to become exposed to new and yet unknown ownership.
• Bankers are nervous of small business at the best of times. They know you, but they don’t know the yet unnamed buyer. In fact, a banker might become concerned that your focus may begin to fade, as you pursue a selling objective. A nervous banker could have an adverse affect on your business, and again, a declining business is going to be less attractive and less valuable to a buyer.

These are but a few minefields one might encounter if/when word gets out prematurely. There are surely others, and we believe it best to bide your time with any announcement of intent to sell.

Disclosure to all the above will become necessary eventually. Disclosure, released carefully in a timely manner that does not erode confidence will be beneficial to buyer and seller alike, and such disclosure can be accomplished safely at the appropriate time. A buyer with a name, a face and a personality, introduced in the right way, at the right time, will be much more tenable than will a totally unidentified and faceless "someone." We have found it advantageous to withhold any disclosure until the actual buyer can be associated with the announcement. This means waiting until after an Offer to Purchase has been submitted by the buyer, and accepted by the seller, and usually, until after due diligence has been conducted and accepted as well.

But, you won’t get a serious offer to purchase from a knowledgeable and experienced buyer without first disclosing a great deal of confidential information. Most serious buyers will first want to understand almost everything about the company before committing a serious Offer to Purchase. And, as was stated earlier, conflicting interests of the buyer and seller can surface early, particularly when the planning, preparation and justification have not been adequate.