Is confidentiality important when selling a company?


Most business owners are afraid to speak to someone when they are ready to sell their business. They fear that the competition will find out and use it to their advantage. However, there are more things to worry about than your competition.

Finding that your business is for sale also affects sellers, customers, employees, lenders, and your family. It is important to think about when each of these parties should be informed of a potential transaction. Typically, people assume the worst and fear the unknown. Hence, the best time to disclose the company for sale is after facts and schedules are known, especially if it has a direct impact on them.

Each situation requires a different time to show that you are planning to sell your business. It is necessary to spend time thinking about the timing, reasons, and exceptions to let each party know that you are selling the company.


Timed coordination: Your investment banker, CPA, attorney, and financial planner should be made aware of your sales intentions when their part in the process begins.

Reasons: To have the best chance of a successful transaction, you need to hire consultants who are experienced in doing business. Before speaking to anyone, an investment banker should be consulted so they can manage the process and news. You should notify your CPA whenever you need the estimated tax implications of a transaction. Your attorney should be contacted when you are at the formal sales contract stage. Your financial planner can help you determine your best post-transaction investment options after you’ve signed an agreement.

Exceptions: For very large or complex transactions, advice from these advisors may be required earlier in the process.


Timed coordination: In most cases, sellers shouldn’t find out about this until after the sale is complete.

Reasons: Sellers may be concerned about meeting payment terms, buyer using their own sellers, volume changes, and increased demands from the new owner.

Exceptions: If there are long-term contracts, the buyer may want to confirm that the contracts will be fulfilled with a change of ownership. If you have overdue payments, disclosing that you are preparing to sell the business may encourage them to keep selling to you. If a seller is a potential buyer, they need to be notified when you bring your business to market.


Timed coordination: In most cases, you never want customers to know the company is up for sale. You want the company to continue serving customers before, during, and after the transaction, as it shouldn’t matter who owns the company.

Reasons: Customers will fear that a new owner will change their prices or that the service will deteriorate. You may even wonder if the new owner wants to sell to you or steer the company in a different direction. Customers become attached to employees, so they may fear their favorite employee will be fired. When you are the primary contact for a customer, they worry about how the new owner will treat them.

Exceptions: If you have long-term contracts or most of your sales are to a few customers, the buyer may want to confirm with those customers that the sale will continue after a transaction. If your company is behind on the requested delivery dates or you don’t have a succession plan, let your customers know earlier in the process so they can be confident about the future of your business.


Timed coordination: Delay competitor discovery for as long as possible. Eventually they will find out, but first you want the new owner to prove to customers and suppliers that the terms are the same or better after the deal so they don’t go to competitors.

Reasons: Competitors will try to cast doubt on your customers for fear of the unknown.

Exceptions: Sometimes competitors can pay the most for your business. Timing is crucial when a competitor should be involved in the sales process.


Timed coordination: Usually it is the day before the transaction.

Reasons: Employees will be hardest hit by a new owner. They fear how their salary, roles, and expectations will change. They often mistakenly assume layoffs. People read of very large corporate mergers that resulted in significant layoffs. This is not typical when selling a small or medium-sized business. In their minds, however, the perception is a reality.

Exceptions: A few key employees need to be involved in the sales process. They are needed to present the company in the best possible light and the buyer wants to know that they will stay after the transaction. If you haven’t reinvested in the company or are well past retirement age, knowing a transition to a younger owner can encourage employees to stay. If an employee might be interested in buying the company, they need to be involved in the process at an early stage. Be aware that most employees are not good owners and do not have the necessary financial resources.


Timed coordination: Notify after a sales contract is signed.

Reasons: Lenders can worry if business declines due to the distraction of a transaction. Lenders don’t want to lose you as a customer. Some lenders are not good at keeping secrets.

Exceptions: If you are behind on loan commitments or missing covenants, notifying the lender that you are selling can increase their willingness to work with you. If the buyer wants to use your existing lender to fund the transaction, the lender may need to be involved earlier in the process.


Timed coordination: Often times, this can be the hardest part of knowing when the time is right. Every transaction can be different and every family member can be different. In general, family members should be informed as soon as you have committed to selling your business.

Reasons: Family members don’t like surprises. Family members can sometimes play hard to try to derail a transaction. Children will wonder how a transaction affects their legacy. Sometimes timing can be need-to-know based.

Exceptions: If family members are not involved, there may be no need to disclose the process. If family members are shareholders or have borrowed money from the company, they need to know earlier in the process. If family members are employees, they and the buyer need to know whether their employment will continue after a transaction.

It is difficult to decide when and how to inform affected parties. In some cases, this can be the most critical aspect of the transaction process. Before putting your business up for sale, a communication plan needs to be established. Speaking to someone who specializes in business transactions and has experience closing deals successfully can help ensure that you are doing everything right. Getting it right can mean maintaining good relationships with your family and co-workers and achieving the greatest possible value for your business.

Ronald Myer is President of Summit Advisory Inc. in Lancaster.


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