How do you keep a business sale confidential and stop my competitors finding out?

Apeksha Tanna

There are several steps you can take to maintain confidentiality during a sale process. These include the following:

Use appropriate forms of communication

Some common-sense actions can be easily overlooked. You should ensure that discussions regarding the sale are always held in private meeting rooms. As with any confidential matter, sensitive digital documentation should be password-protected, and any printed matter referring to a potential sale either locked away or shredded once used. You as a seller should, of course, never reference your intention to sell – or refer to a business sale process – to individuals who do not need to know.

During the initial stages of engagement, we advise our clients to start using their personal email address (as opposed to their business email address) for all sale-related email communication, to retain privacy. Meetings with your advisor can also be held offsite.

When an advisor visits your offices, you should ensure they sign in with an agreed company name which does not compromise your desire for the planned sale to remain confidential.

During the later stages of a sale process, information with bidders should be only shared via a well-managed virtual data room. This provides access control measures to third parties, as well as security measures such as watermarks on printed material to deter from the distribution of sensitive information.

Use ‘hold’ lists

When shortlisting potential buyers to approach, a good advisor will advise you to create a so-called ‘hold’ list of candidates. These are companies who are effectively ‘on pause’ as a potential buyer. While they may display strong synergies, significant financial resources and an acquisitive track record, companies on this list will typically also have commercial sensitivities, as they might be a competitor to your business, or a key trading partner. Companies on the ‘hold’ list will not be approached initially but, if appropriate, can be approached at a later stage once the level of interest from alternative parties has been established.

Use of NDAs and a ‘no-names’ teaser

The initial approach to potential acquirers should be conducted on a strict ‘no-names’ basis. To support the proposition, a marketing document often referred to as the ‘teaser’ is produced. This is designed to convey the key investment highlights and opportunity of the company for sale. A teaser should never mention the name of the company which is for sale.

If the potential acquirer wishes to engage further at this stage, a signed Non-Disclosure Agreement (NDA) is put in place ahead of revealing the name of the business. This will create a legal contract, preventing the potential acquirer from discussing the sale with third parties.

Move fast and maintain momentum

Once the initial approach stage has been started, acting swiftly can limit the time period during which news of the sale may leak out.

In any transaction there is the possibility of delays, outside of any vendor’s control, which can lengthen the timeframe to the completion of the sale. Effort spent to ensure the business is correctly prepared for a sale process prior to approaching buyers will increase the chances of a successful and timely completion.

The first benefit of this is eliminating any surprises. Appropriate preparation of the financials and legal aspects allows for upfront disclosure, and ultimately saves valuable time during negotiations.

Secondly, being able to provide responses to Due Diligence (DD) queries swiftly and effectively can speed up the DD process overall. It can also keep buy-side advisors focused on completing a critical part of the process pre-completion.

Use of an advisor

The use of an advisor allows for the approach to potential acquirers to be via a third party, rather than from the company itself, which would compromise confidentiality.

An advisor will be able to screen queries to ensure potential buyers are serious with respect to the acquisition, and not just seeking to gain information.

During a professionally run sale process, the business for sale is typically only identified by a project codename, rather than the name of the company itself. To aid confidentiality, this project name will be used by all parties – seller, advisors, acquirer and buy-side and sell-side lawyers – in all communication channels, for the duration of the sale process

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