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Business Sales Confidentiality: What Should You Disclose?

May 20, 2016

In order to conclude a successful business sale, the owner has to be honest and transparent about all aspects of the company. Failure to do so could result in he or she being sued for misrepresentation, fraud or any number of other actions the buyer’s legal team may conjure up. 

 

Ensuing legal action could result in the original sale price being adjusted downwards or the sale being declared null and void. So, given that all information has to be declared before the sale can be finalized, the question is really: how and when should you disclose information about the business?

 

The 'how' part of the question is relatively easy to deal with. Any information disclosed along the sales path should be covered by a Non-Disclosure and Confidentiality Agreement. 

 

That way, the seller can be sure that any prospective purchaser will not pass on any sensitive information that relates to the business, while the buyer has sufficient access to the information required to make a decision about the purchase.

 

The 'when' part of the question is more difficult. A lot depends on the business, the area it operates in and the nature of the competition. 

 

While all businesses face competition, some areas are particularly cut-throat and demand a lot more secrecy. For anyone who is thinking about selling a business and is worried about confidentiality, it’s best to take some expert advice from suitably specialized lawyers or accountants, or even a business broker. 

 

A broker is a very good place to start for those who want to keep the whole notion of the sale secret until the deal is finalized, as the broker can confidentially and professionally market the business and only disclose exactly who is selling what when they have ascertained that the prospective buyers are serious players.

 

Information leaking out at the wrong time about a potential sale can cause a lot of damage to a business, particularly in the areas concerning staff, customers and suppliers, while banking relationships may also experience some fall-out. 

 

Staff will naturally be concerned about their job security. Consequently, some of them may decide to seek employment elsewhere. Such a loss, particularly among dedicated employees, can lead to a slump in morale and a decline in productivity, which will not sit well with the buyer of the business, who will also be expecting to inherit the whole team.

 

Customers may feel edgy when they hear the business is for sale, as they will wonder whether they will be able to count on the same level of service, support and dedication that they have enjoyed in the past. This may cause them to move their custom elsewhere, undermining the value of the business.

 

New suppliers are unlikely to offer the best credit terms, while relationships with current suppliers may take a knock as they ponder the business’s financial situation.

 

Banks, too, may view the potential sale unfavorably, as it casts uncertainty upon the whole operation. Banks don’t like risks, and they may take action such as withdrawing or reducing the overdraft facility.

 

The only people likely to smile at the news of the sale are the business’s competitors. They’ll see it an opportunity to undermine the business with suppliers and customers in an attempt to win them away, thereby diminishing the value of the company.

 

Steve Sink

Certified Business Intermediary

Merger and Acquisition Master Intermediary

                                ss@phxaffiliates.com

                               Cell: 309.696.8508

 

 

Looking to buy or sell a business?  Give us a call to discuss all of your options.  Confidentiality is our utmost concern and we strive to work with you to achieve the results you want.

 

Phoenix Affiliates

Illinois Offices:  Champaign, Bloomington, Peoria Heights, Quincy

Iowa Offices:  Pella, Denison

Headquarter Office: 309.688.5050          Fax: 309.688.5403

 

Website: phxaffiliates.com

 

Some of our current listings:

Central Illinois New and Used Car Dealership with Two New Car Lines. Make Offer!!  Contact Steve

Auto Repair & Tires. VERY profitable, owner wishes to sell ASAP. Annual cash flow to owner is $170,518. Asking only $379,000. Real Estate available too!  Contact Steve

Better Western Illinois restaurant near college and tourist destination. $250,000. Real Estate available. Contact Rob.

Mini Warehouse Storage Business, Very Profitable, Room for Expansion, Bank Owned.  2015 Cash Flow over $200,000  asking: $2, 000,000.   Contact Steve

Central Illinois horse, utility and cargo trailer dealer with loyal customer base.  $2,000,000 OBO.  Real estate available. Contact Rob.

Ag Loan Portfolio. $5,850,000. Contact Ken.

Iowa Medical Professional Office Building.   Contact Doug.

Central IL Cosmopolitan Fine Dining Restaurant. Contact Rob.

Regional Advertising Agency. $659,000. Contact Steve

Bake Shop, great location, Owner wants to retire. $450,000. Contact Mike.

Iowa Pallet Company with annual sales of almost $1M excellent equipment, location and facilities  $284,900  Contact Steve

- Illinois-Based Soil Testing Lab. $1,100,000. Contact Brad

 

 

Steve Sink, Owner 309.696.8508, Peoria, IL email: ss@phxaffiliates.com

Tom Thompson, Partner 309.264.8011, Peoria, IL email: tt@phxaffiliates.com

Mike Troup 217.223.5102, Quincy, IL email: matroup@adams.net

Doug Van Zee 641.780.1608, Pella, IA email: vanzeemd@yahoo.com

Mike Ciolli 217.637.1872, Champaign, IL email: Mikecphx6@gmail.com

Brad Glenn 309.275.7178, Bloomington, IL email: Brad.glenn@frontier.com

Kevin Woods 309.830.2545, Bloomington, IL email: woodsconsulting@frontier.com

Rob Lowe 309.740.8050, Pekin, IL email: rjonlo@gmail.com

Greg Clore 309.453.6343, Peoria, IL email: kgpartnersinc@gmail.com

Ken Livingston712.269.5276, Denison, IA  email: mayorkenl@gmail.com

Larry Maschoff 309.530.9065, Sarasota, FL email: lmaschhoff@gmail.com

 

 

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