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A seller's main concern, after price, is usually one of confidentialty

October 24th, 2007 3:05 PM

Confidentiality
By Tom West

A seller’s main concern, after price, is usually one of confidentiality. They are afraid that if word gets out that the business is up for sale, employees will bolt, and that customers and suppliers will stop doing business with them. Not to downplay the confidentiality issue, but these things very seldom happen and if it does, it can usually be handled without serious damage being done.

Confidentiality is a “Catch 22” situation. The seller’s main goal is usually getting the highest price possible. This requires telling possible buyers of the seller’s decision to sell. The more potential buyers contacted, the better the chance of achieving the seller’s goal—the highest possible price.

It has been our experience that if the word gets out the least likely culprit is the intermediary/business broker. In fact, the usual culprit is the seller himself. It goes without saying that the seller has told his or her spouse, his or her banker, and/or the accountant or outside bookkeeper. Mention has most likely also been revealed to a close friend, the business owner next door, the landlord, his golfing buddy—the list is endless. Although the intermediary usually gets the blame, he or she is the best defense against word getting out. Plus, the intermediary is also the best person to deal with the damage control, if it does.

Here are a few suggestions to reduce the risk of confidentiality being breached:

The seller’s employees should be conditioned to seeing strangers walking through inspecting the business—have suppliers, customers or advisors tour the facility prior to marketing the business.
Sellers should inform a key employee of his or her decision to sell. The employee should be told that he will receive a bonus if and when it sells; give him or her a raise and a commitment that the new owner will be told that the employee is a valuable asset to the business and should be retained.
Every attempt should be made to shorten the time between going to market and an actual sale. This requires a lot of up front work prior to going to market—putting the paperwork together, preparing the marketing program, gathering necessary information for the buyer’s due diligence, including solving any problems prior to offering the business for sale (legal or contractual issues, environmental problems, governmental requirements being resolved, etc.)
Confidentiality leaks can occur by the simplest of sources. An errant email or fax. Deliveries by FedEx or UPS given to the wrong person. How communications are handled should be resolved prior to going to market.
The best way to deal with confidentiality and still try to get the highest price possible is to use an intermediary/business broker. They deal with the issue constantly and have a lot of experience in preventing it—and handling the damage control if it happens.

Tom West is the founder of Business Brokerage Press and past president and former executive director of the International Business Brokers Association (IBBA). West holds the Certified Business Intermediary and Fellow of the IBBA designations from the association and is nationally recognized as an expert in the field of business brokerage.

Posted by Jeff Slaton, President on October 24th, 2007 3:05 PMPost a Comment (0)

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