Second only to the value of the business, a major concern for every business owner is how do I sell my business without my employees and customers finding out it’s for sale. Confidentiality of the prospective sale of a business is critical because the possibility of the business being sold could cause employees to panic and look for other jobs as well as cause problems with both customers and vendors.
As Business Brokers confidentiality of the prospective sale of the business is vital and one of the most important aspects of our job in representing the seller-owner of a business. So how do we maintain confidentiality of the sale of a business?
How to Confidentially Sell a Business
- All advertisements are general in nature and do not specifically mention the location of the business or exact type of business.
For example; an electronic distribution business located in Irvine CA would be advertised as Orange County Distribution business or Orange County based Electronic Distribution Company.
- Ads for the business do not specifically describe the products or services if this may identify the business for sale. We use broad descriptions for the products and services so buyers cannot connect what business this is.
- Confidentiality Agreements and Buyer Profiles are required from all prospective buyers before any confidential information is sent. We use the CABB (California Association of Business Brokers) Confidentiality Agreement along with a Buyer Profile form that asks the prospective buyer to provide financial information such as net worth, credit score, cash available for investment, and their background. After the prospective buyer has signed the NDA (Confidentiality Agreement) and provided a complete Buyer Profile indicating they are qualified the Confidential Business Review (business summary) is sent.
- Meetings at the business and with the owner are scheduled for after hours or off-site to preserve confidentiality of the sale. The initial meeting with the buyer is with the broker and after the basic questions about the business have been answered and the buyer is interested in seeing the business, only then a meeting with the seller is scheduled. We also use the initial buyer meeting as a screening process to eliminate “lookers” and buyers that are not a fit or are not serious so we do not waste the seller-owner’s time.
- After an offer has been accepted Due Diligence begins. Since the offer is contingent on Due Diligence being completed and approved as well as other contingencies such as lease and financing it is still important to maintain confidentiality of the pending sale of the business. To accomplish this Due Diligence is conducted largely by remote by sharing files with the buyer and their advisors via a shared Dropbox folder and onsite meetings are scheduled after hours.
- When do the employees, customers and vendors find out about the sale of the business? This varies depending on the type of business and situation with the staff, suppliers and customers. In general we advise the buyer and seller to inform the employees at or after the close of escrow, in some cases the employees may be advised of the sale just before the close of escrow. This and the notification of suppliers is worked out during Due Diligence to create the smoothest transition.
For information about how to confidentially sell your business contact us. We offer a no obligation consultation and Free Market Value Report.