If you are considering selling your business, you probably are wondering: How do I keep the sale of my business confidential?
That’s an important question because you don’t want your employees, customers, competitors, or suppliers to know that your business is for sale. It’s much better to let them know after a deal is completed. Then you can introduce the buyer and make people more comfortable with the fact that you will help the buyer with an orderly transition of the business. Uncertainty makes people anxious and may make them want to change jobs or who they do business with. Protecting confidentiality is in everyone’s best interest.
The most effective way to keep the sale of a business confidential is to have a third party screen the buyers and make sure that they sign a confidentiality agreement before they know which company is for sale. However, there is more to it than this.
Maximizing your price and keeping a business sale confidential
In order to maximize the price of your business, you need to let a number of potential buyers know that your business is for sale. How do you attract the right potential buyers without advertising that the company is for sale? Experienced Business Brokers and M&A firms are used to doing this as part of their normal process.
Marketing a Business for sale Confidentially
The first step is for a business broker to get information about the business, review the financial information, and provide a potential selling price. They will want to write up a one-page ad or description about the business, sometimes referred to as a teaser. This document doesn’t have the name of the company and an exact location. It contains the type of business and a general location.
The idea of a teaser is to provide enough information to get the right potential buyers interested but not so much that someone can read the teaser and know which business is for sale. There is a bit of an art form to writing a teaser. So, it’s essential to work with an M&A firm or Business Brokerage that has experience in finding the right balance with writing the marketing documents.
A way to check whether or not someone can find out the identity of a business from the ad is to open up a new Cognito window in Google and search on the various keywords in the ad and see whether the business for sale comes up in searches of this keyword and general location. If it does, then you want to delete some of the keywords that give away the identity or give a more general description of the location and/or business.
Sometimes a general description can provide more potential buyers, then a very focused description will. So you do get the added benefit of this with more general descriptions. An example of this was when were selling a pizza dough manufacturer and distributor in Upstate NY.
This was the only business like this in their general area. So we advertised it as a specialty food manufacturer and distributor in the capital region of NY. This got many inquiries, and when people signed a Non-Disclosure Agreement and provided some information on their qualifications, then we gave the details. It resulted in multiple offers and a quick sale of the business.
Advertising Businesses for sale confidentially
Most business sale websites such as bizbuysell, businessesforsale.com, and others have examples of businesses for sale being advertised confidentially. You certainly would not want to advertise a company using a real estate agent who is typically used to putting the exact address of the location that they are trying to sell. The benefit of using an experienced business broker is they are used to selling businesses confidentially.
Experienced Business Brokers will also have an extensive database of potential buyers that they will market the teaser to. This prospective buyer database should include buyers in your industry as well as related industries and private equity groups that focus on your industry.
Synergy Business Brokers focuses on selling businesses confidentially in the following sectors: manufacturing, construction, technology, services, healthcare, distribution, engineering, education, and transportation. In 17 years of selling businesses in these areas, we have a lot of potential buyers for companies in these areas.
Our potential buyers are accustomed to signing confidentiality agreements and providing us with information on their qualifications and interest level.
In addition to providing a general idea of the current size and focus of the company, we also provide potential buyers ideas on how to grow a business. This is an excellent way to get them excited about the possibilities of what they can do.
Confidentiality when selling your business to a Competitor
When you are discussing the sale of your business to a competitor, you need to be extra careful about privacy. You have to be cautious about what you show to them and when. Some business owners want to rule out talking to specific competitors, and you want to make sure that your business broker or M&A firm knows which competitors not to reveal any information to. In some cases, competitors might be an excellent potential buyer for your business, so you don’t want to rule them out unnecessarily. On the other hand, you want to feel comfortable with whoever you sell your business to. So it’s essential to have a dialogue with your M&A Broker as to what the strategy is with which competitors.
Managing Confidentiality during the Business Sales Process
Whether selling to a competitor or a non-competitor, you don’t want to release all of your confidential information early on in a business sales process. For example, you would usually wait to release certain sensitive information such as customer contacts or information on employees or suppliers until you are firmly down a sales process and possibly have a purchase and sale agreement in place. Some of the information may not be released until after the deal is closed. Working together with your M&A advisor and attorney, as well as the buyer’s advisors, can work out a plan that satisfies all parties.
For example, in some cases where a buyer wants to talk with some customers or employees before a sale is completed, we position the buyer as checking references either as a potential customer or potential investor as opposed to someone that might be buying the whole company. In many cases, a buyer doesn’t talk to clients until after a sale is completed, so its a matter of negotiating what works for both buyer and seller.
Confidential Business Consultation
If you are ready to take the first step for a confidential consultation, please call us at (888) 750-5950 or email [email protected]. We focus on selling profitable companies with annual revenues of $700,000 to $70 Million in construction, technology, manufacturing, healthcare, distribution, engineering, and services.
To read more about our confidential business sale process, view our 15 Step sales process. We look forward to hearing from you and discussing how we can help you achieve your goals to find the right buyers to maximize your sales price and keep the sale confidential.