Maintaining confidentiality during sale of a business


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Steve Catley
Business owners typically do not want the fact they are selling or contemplating selling their business to be public knowledge. Awareness that the business may be sold may lead to staff looking for other job opportunities, suppliers renegotiating contracts, or customers looking elsewhere for your services.

By using a business broker, all of this can be managed professionally. Business brokers typically have tried and tested confidentiality policies and procedures.

When writing the advertisement announcing the business is for sale, brokers take care to hide details that would identify the business. Brokers know which words to use and know how to make your business an attractive choice while not revealing anything too crucial.

It’s about finding the right balance between, not disclosing too much information while still attracting the right buyer.

An advert outlines key points about the business such as industry, key features, and benefits but just enough for an enquirer to want to know more.

Commercially sensitive information and identifying details are typically withheld until the buyer has signed a legally binding Confidentiality Agreement.

This is important for any size or type of business, but becomes even more so for larger businesses, where sales figures and other data are commercially sensitive.

The business broker can take control of the confidentiality process and give first-hand guidance on when information should be shared.

Once this document is signed, and before disclosing any additional information, a business broker typically asks specific qualifying questions which can help sort the serious buyers from those that are just curious or can’t afford to buy.

Notably, at this stage there is no direct contact between the buyer and the business, avoiding disclosure of identifying details. Confidentiality is maintained until each potential buyer has been qualified as genuine,

Release of information about the business is typically released in stages based on a tested process. Once the business broker has qualified a potential buyer, a summary document will be provided giving key facts about the business but withholding information such as staff details, customer names and full financial reports.

As the buyer continues to be interested or is ready to make an offer, more information can be released. It’s possible to continue to maintain secrecy right through due diligence, depending on the nature of the business.

The business broker can take control of the confidentiality process and give first-hand guidance on when information should be shared.

It is important to engage with a broker who understands when to release information to potential buyers, and who can help you balance the conflicting needs of marketing and confidentiality.

Related: How to prepare your business for sale

Steve Catley
Steve Catley
Steve Catley is a Business Broker at LINK Business Brokers. He can be contacted at 021 341 117 and steve.catley@linkbusiness.co.nz

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