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How to ensure confidentiality when selling your business

Posted by Shivali Anand

December 30, 2021    |     3-minute read (584 words)

If you're considering the sale of your company, you must take precautions to ensure the process stays under wraps so you can attain your exit goal. A leak could set off a chain of events that could jeopardize the sale — staff may quit, customers might leave and the valuation of your business could plummet. Furthermore, prospective purchasers may become wary if sensitive information is shared with others.

To keep the sale confidential, follow these seven practices:

1. Use blind ads

A blind ad is an effective technique for garnering interest without jeopardizing confidentiality. Its purpose is to generate inquiries without revealing any identifying information. With a blind ad, just enough is disclosed to pique buyers’ interest and prompt them to request more information. Typically, a blind ad focuses on the industry, the approximate size of the business, a basic description of the location, revenue and cash flow.

Points to consider when using a blind ad:
  • Avoid sharing any personal contact information.
  • Use a separate email address for buyer queries.
  • Use a phone number that is completely unrelated to you or your firm.
  • Use a P.O. box if you run a traditional print ad.
  • If using an online marketplace, employ the site's identity-protection tools.

2. Create a nondisclosure agreement

Before you interact with would-be purchasers, have an NDA in place – an honest buyer will not hesitate to sign this document. You can get assistance from a lawyer or an investment banker in this matter. Consider including a "no hiring" clause in your agreement. This will prevent potential purchasers from offering a job to any of your employees after they learn about your business.

3. Screen potential buyers 

Screening potential purchasers will safeguard your privacy. Qualified buyers will expect to be screened because they are serious about purchasing your firm and willing to provide personal information to go to the next steps. It also gives would-be buyers assurance that the company they're buying has taken the required measures to protect its financial information and trade secrets.

One method for screening prospective buyers is by incorporating response requirements in your blind ad. Request that respondents describe their qualifications and purchase intentions; if possible, by obtaining a signed letter of intent.

Prior to speaking with a possible buyer, record their information and create a standard response to their queries that conceals your company's identity. Ensure a fair exchange of information to build rapport.

4. Use a business broker

Brokers can respond to buyer inquiries and contact them without disclosing your identity or business name. They are skilled at sharing just enough information to inspire curiosity while keeping your business’s identity secret. They may also assist you with preparing NDAs, contracts and other documents.

5. Hold meetings away from your business 

To protect the identity of your business, meet with potential buyers outside your home or office. Meet with them in your broker's or lawyer's office instead.

6. Involve as few people as possible

You might need the assistance of a few key employees in putting together documents, conducting due diligence or meeting the buyer, but it’s best to limit the number of individuals involved. Have these staff members sign an NDA and emphasize the importance of confidentiality.

7. Prepare a response for when the news gets out

Regardless of how hard you try, competitors, customers or employees may catch wind of the possible sale. Prepare responses for their anticipated questions, and have a plan for how you will respond to all questions that could arise. 

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