Posted: 04.11.2019

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The latest in our series of articles crystallising the complex transaction of selling your business into ten golden rules. You will only sell your business once and have one chance to get it right!

# Eight


Apart from getting the best possible deal, any sale process should also minimise disruption through the process and reduce the risk of damage to the business in the event of an aborted transaction

It can be  hugely disruptive and damaging if your customers, people, suppliers and competitors find out that your business is for sale, so the basic rule is to only tell those people who absolutely need to know and swear them to secrecy

Many owners are very uncomfortable with not informing key and long-standing team members of their plans, feeling that it is simply “not right” to withhold what is going on to people that have been with the business for a long time and have contributed to its success. This is totally understandable but as well as potentially causing many problems for the owner, telling employees can often result in them assuming the worst and that their position has become seriously under threat. Careful consideration needs to be given to introducing that level of uncertainty and distraction into their lives for potentially little gain in the early stages of a potential transaction

In theory, it is best to keep an impending sale quiet until very close to or at completion. Being practical, it is often “when, not if” the pressure to disclose to certain employees becomes too great – often as a result of unusual activity around the business, requests for information, the owner not being available as much as usual, market rumours, etc. In these cases, it is reluctantly accepted that more people may need to be taken into confidence as the transaction progresses. Whilst no two situations are the same, practical and experienced advisers will be able to help you manage the position

The basic rule is not to tell anyone until you have to

So, what about the potential buyer? In all cases, non-disclosure agreements should be obtained but the practical reality is that these only provide a certain degree of practical protection and once someone knows something, they cannot un-know it. For example, if the buyer is a competitor and obtains your profit margins and costing approach, they cannot un-know that when bidding against you. One practical way to deal with this issue and avoid a buyer simply “fishing for information” is to identify and then withhold any information which is particularly commercially sensitive and could damage the business in the event that the sale does not complete. This information will, of course, need to be released prior to sale but only when all other key issues have been addressed and it is clear that the buyer is serious (often evidenced by their time and cost commitment to the transaction). A real example is where the formula and manufacturing process of a core product was withheld until the day before sale. Clearly, the buyer wants to see everything from the start of the process and that relationship and buyer demands need careful managing

Overall, there is a balance to be struck as most owner-managers will need support from internal teams and will often want a trusted “sounding board” whether a family member or friend. The key is to keep it tight

In short, do not tell anyone until you have to

Thinking of selling in the next five years or simply want an informal chat over a coffee then the team at Provantage Corporate Finance would love to hear from you

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