Small Businesses

Should You Keep Your Business Sale Confidential?

  • 4 min Read
  • May 7, 2020

Author

Escalon

Table of Contents

If you are considering selling your business, it’s imperative that the potential sale remains confidential during the process so you can achieve your exit goal. If word gets out that your business is being sold, it could trigger a series of reactions that could be detrimental to the sale of your business — employees may seek other opportunities, customers may leave and the valuation of your business may go down. Moreover, prospective buyers may become skeptical if they feel sensitive information has been shared with others.



Here are seven things you can do to ensure confidentiality when selling your business.


Use Blind Ads



A blind ad is the best way to create interest without risking confidentiality. The goal of blind advertising is to drive inquiries without disclosing any identifying information. It reveals just enough to get buyers interested and request more information. A blind ad typically focuses on the industry, approximate size of the business, a general description of the location, the revenue of the business and the business’ cash flow.



Points to keep in mind while using a blind ad:

  • Do not share any personal contact information when using this channel.
  • Create a separate email address for all buyer inquiries.
  • Get a phone number which is not connected to you or your business in any way.
  • For an ad in traditional print media, use a P.O. box.
  • When using an online marketplace, use the website’s identity-protecting features.



Put a Non-Disclosure Agreement in Place



Have a non-disclosure agreement (NDA) in place before you have any meaningful conversations with would-be buyers — an authentic buyer will not have any problem signing this document. You can ask your lawyer or your investment banker to help you with this.



You can include a “no hire” clause in your confidentiality agreement as well. This will prohibit prospective buyers from offering a job to one or more of your employees after receiving information about your company.


Pre-Screen Buyers Before Sharing Sensitive Information



Screening potential buyers helps protect your confidentiality. In fact, qualified buyers will expect you to screen them because they are serious about buying your business and are prepared to provide information about themselves in order to move on to the next steps. It also gives them the confidence that the business they are buying has taken the proper steps to ensure that its financial information and trade secrets remain protected.



One way of screening buyers is to include response requirements in your blind ad so unqualified buyers can opt out. Ask responders to describe their qualifications and purchase intentions — if possible, obtain a signed letter of intent.



Before talking to any potential buyers, record information about them in a form and prepare a standard response to their questions without divulging the identity of your business. Build rapport by ensuring a fair exchange of information.


Work with a Business Broker



Brokers can field inquiries from prospective buyers and reach out to them without mentioning you or your company name. They are adept at revealing just enough information to pique their interest while keeping your company’s identity confidential. They can also help you prepare NDAs, contracts and other documents.


Don’t Hold Meetings at Your Business Address



Always meet with prospective buyers outside your home or office to protect the identity of your business. You can meet them at your broker’s or lawyer’s office instead.


Involve as Few People as Possible



While you may need a few key employees to assist you in putting together certain documents, carrying out due diligence or even meeting the buyer, it’s best to limit the number of people involved. You can get these employees to sign an NDA as well and reiterate to them the importance of the confidentiality agreement.


Have an Answer Ready for When Word Gets out



Despite your best efforts, word about your potential sale may leak out to your competitors, customers or employees. Come up with answers to their (expected) questions and remain prepared about how to respond to all questions that may arise.

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