How to be confidential when selling
For most business owners, confidentiality is a must when selling their business. Confidentiality is important to business sellers for a variety of reasons, including:
- Safeguarding customer and supplier relationships;
- Protecting your trade secrets and proprietary knowledge from competitors, and;
- Ensuring your staff are not distracted from their day-to-day roles.
So how do you maintain confidentiality throughout the completion of your divestment, whilst still generating ample buyer interest? Here are four easy ways to ensure this happens.
1. Use an M & A Advisor
An M & A advisor is well versed in managing the confidentiality constraints involved in completing a divestment.
As an intermediary, an M & A advisor can ensure the identity of your business, as well as any confidential information relating to your business is kept secret from prospective buyers, until such time that the prospective buyers have agreed to a range of confidentiality terms, and are thoroughly qualified.
From here, your M & A advisor can release any required information to the prospective buyer in a careful and considered manner, ensuring your best interests are protected, whilst still generating plenty of genuine buyer interest.
2. Ensure all Prospective Acquirers are Carefully Vetted
Prospective acquirers should always be carefully vetted and qualified before any information which could potentially identify your business is revealed.
As part of this, it is important to research any prospective purchasers thoroughly before making contact. Your research may reveal details about your prospective purchaser’s financial position, or their interest in completing acquisitions. This can allow you to make a measured assessment of their seriousness before discussing your opportunity with them.
Further, any initial conversations with a prospective buyer should be structured to ensure that a clear understanding is gained of their intentions, as well as their financial position.
Your M & A advisor has the skills, experience and resources to ensure all prospective buyers are thoroughly vetted and qualified before discussions proceed to the next level.
3. Execute a Confidentiality Deed
Once you are comfortable with a prospective buyer’s intentions, it is important that a confidentiality deed is executed prior to disclosing the identity of your business, or any proprietary business information.
Your confidentiality deed should specify that the prospective buyer cannot disclose any details revealed to them about your business to anyone, without the express permission of you or your M & A advisor.
This is a vital level of protection to ensure confidentiality is maintained throughout the completion of your divestment
4. Release All Information in a Careful and Considered Manner
Following the execution of a confidentiality deed, the identity of your business, and key information required by a potential purchaser to assess the acquisition proposal should be released in a careful and considered manner.
It is important that the specific information released to each prospective acquirer is weighed up on a case-by-case basis, pending the risks associated with each prospective purchaser. For example, extra caution may be taken when releasing information to a direct competitor.
If at any point while negotiating with a prospective buyer it seems that their intentions are not legitimate, it is important that discussions are ceased and that all information released to the potential acquirer are returned to your M & A advisor.
The damage to your business and to its sale prospects may be immeasurable if confidentiality is not maintained, so it pays to ensure these four tips are followed, and care is taken at all times.
At Quinn M & A, our experienced M & A advisors have the skills, knowledge and experience to effectively manage confidentiality constraints throughout the divestment process.