You want to maintain your business as usual for as long as possible. Keeping the sale confidential until the right time will help you reduce uncertainty and maximize the ultimate selling price.
Keeping The Sale Process Confidential
One of the biggest concerns – and a valid concern – that is most common among sellers of a business is confidentiality. They do not want their employees knowing they’re selling their business, they don’t want their competitors knowing, they don’t want their customers knowing.
In selling your business, using an outside party gives you some space in the market and a buffer to maintain your confidentiality.
When we market a business, we never identify that business or where it is. We may say a “widget company in the southern part of the United States.” When our buyers respond to our general or blind profile, they sign a confidentiality agreement. Then they go through a screening process.
If an owner is selling a business by himself, it’s hard to maintain confidentiality when your buyer is calling you. They know your name, they can look you up, they can see who you are.
Having an intermediary – an experienced layer of protection between you and the market – helps maintain confidentiality and prevent uncertainty that can hurt your bottom line and put your sale, not to mention your profitability, in jeopardy.
What’s likely to happen if people find out your business is up for sale?
Employees Get Nervous.
They worry that they will lose their jobs or that they won’t get along with a new owner. Some employees – perhaps your best ones – may even quit before you have a chance to reassure them. Losing key people is serious, particularly during the sale process. Key staff members provide valuable continuity and business knowledge that buyers are looking for. Lose them, and potential buyers may be lost too.
Customers Begin to Wonder.
They may assume that your business has problems that could threaten their supply chain. They may worry that they won’t get the same quality of product or service from the new owner.
Competitors Will Spread the Word.
Once the competition finds out, they’ll tell your customers and use it as leverage to bring that business to their company. It opens the door for them to steal business from you.
Vendors and Creditors May Tighten Terms.
You may be working with terms of net 45 or more to benefit your own cash flow. But once creditors learn that your company is in play, you may find those terms tightening or notes called due.
On average, a business sale takes nine months to one year. If even just a few of these changes occur early on, the impact can be dramatic. You’re not only running a business; you’re a fireman, busy putting out fires.
A buyer wants a successful operation with few changes until he or she can make them. Too many question marks mean greater risk and lower offers.
Partner with an M&A Professional
Your M&A intermediary can screen inquiries to ensure that competitors aren’t fishing for details. The intermediary should share your identity only after concluding that a potential buyer is qualified and serious. Such prospective buyers should also be required to sign a binding confidentiality agreement that holds them accountable for any leaked information.
You want to maintain your business as usual for as long as possible. Keeping the sale confidential until the right time will help you reduce uncertainty and maximize the ultimate selling price.
If you have questions and would like to discuss your strategy, feel free to book a call with any of our senior Principals.
*This article originally appeared on IBG Foxfin site.
