For business sellers, maintaining confidentiality in your business sale is a crucial part of the sale process. If creditors, competitors, customers, or employees find out about an impending sale, it could adversely affect the business’ momentum and its value. While confidentiality is tricky, it’s less so when the owner works with an experienced, qualified Austin business broker. In this guide, readers can learn which steps to take to keep a business sale confidential.
Use Generic Descriptions
An Austin business broker will advise his or her client against using the business’ name until buyers are qualified and have signed a confidentiality agreement, also known as a Non-Disclosure Agreement (NDA). Businesses should be presented to buyers based on their strength and nature, rather than their names, and responses should be directed to the business broker to main confidentiality. Often, the business broker will also have a targeted list of buyers, which limits the number of people who have any kind of knowledge of the business sale. If the business is advertised, the business is only advertised in the most generic terms, so that buyers do not know which business underlies the ad. This step allows the broker to save money and time by following up only with the most qualified prospects.
Execute an NDA
It’s a good idea to have the buyer sign an NDA (non-disclosure agreement) before they begin working with the seller’s business broker. These agreements are rather broad, and they cover how much info can be shared with buyers’ partners, lawyers, accountants, and advisers. Buyers are required to work with the broker rather than going directly to the seller, which offers many benefits as far as confidentiality is concerned. We also have different NDA’s, depending on whether the buyer is a strategic buyer (this means they are a company), a private equity firm, or high net-worth individual. Different legal wording in these documents can protect a seller, in the rare case where the buyer is simply fishing for information. That being said, the grand, grand majority of our buyers are very serious. They have no interest in starting a business from scratch. They want to buy an established business for a reason. That is, they want to put their skills to use right away. Usually, these skills mean taking a business from one level to another. They do not want to spend the two or three years it would take, at minimum, to get a business off the ground with limited to no cash flow during that time. They would rather take an existing business and scale it to new heights. Although tire kickers do exist in the marketplace, this rarely happens to our clients. Our buyers have no simply interest in learning information, just to start a business from scratch. That is a waste of their time. They would rather spend that time scaling an existing business.
An Austin business broker will screen potential buyers as a way of protecting the seller’s confidentiality. The firm has proprietary buyer verification methods, and the team takes the entire process seriously. If a buyer doesn’t have a resume, a LinkedIn profile, an established fund with committed capital, or some verification method, they’re not taken seriously, and they’re not qualified to buy the business. We do not share any information with these buyers. We ask the buyer to fill out a buyer profile, which details who the buyer is, where they work, and what kinds of fund they have. This does a good job of weeding out potential tire kickers.
Learn What to Expect From the Broker
A qualified buyer would prefer for the business’ information to stay private because they like knowing that the broker has taken steps to protect sensitive information. Buyers should be ready to go through our proven process, and if they seem to be in a rush, they’ll likely be eliminated from the buyer pool. While it’s important for the seller to work closely with the broker, it’s vital for buyers as well. Most of the buyers we work with have been through this process before and will quickly ask us for our NDA. It’s usually a key sign that they have not been through this process before, if they balk at signing an NDA. We have a verbal understanding with our sellers: You spend your time running the business while we get the deal done for you. That’s the understand we have with sellers: You run the business and keep the cash flow going, while we run the deal. This understanding seems to work well. Business brokers understand that maintaining confidentiality in your business sale is very important and deserves the utmost care.
Meet the Buyer In Person
After the NDA’s been signed and the buyer reviews the Confidential Information Memorandum (CIM), they will often ask for a conference call between Seller, Buyer, and Broker. Here we get into more detailed questions and answers. If things progress, the next step in the initial selling process is for the Austin broker to schedule an in-person meeting between the Buyer and Seller. Ideally, such meetings are held via Zoom (during covid) or at the business’s location. In-person meetings at the location, occur after hours, once all employees have left. Serious buyers will want to see the facilities as part of due diligence, so this meeting checks one of the diligence boxes. Buyers usually want to get a feeling for the Seller that they can’t get over the phone, so this meeting becomes part of the trust building process that needs to occur between buyer and seller. Sellers typically take in-person buyers more seriously, and buyers will get the chance to learn whether the seller will help them during the training and transition phase.
The Final Word
As sellers review the steps listed above, they may be nervous about the process, especially if they’ve never gone through it before. An effective Austin business broker will help both parties in a way that keeps confidentiality throughout the entire process. CGK Business Sales has successfully handled many transactions over the years, and the team has an extensive knowledge base on how to successfully market and sell businesses. We know how to run an effective due diligence process to get a deal done. Plus, we have outstanding legal, banking, and accounting referrals that will help take an opaque M&A process from start to completion. We will begin by maintaining confidentiality in your business sale. Call today to schedule a consultation or visit the website for more details.