How to keep the sale of your business confidential [Case Study]

maintaining confidentiality during a business sale

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When we speak with business owners, how to keep the sale of your business confidential is often one of the first questions after deciding “I want to sell my business. The reality is that you have to share information about your business with potential buyers for them to know they want to buy it. This is where confidentiality agreements come in.
Confidentiality agreements are used when there is a need to share sensitive information with someone, buy you don’t want the information to be spread or used beyond your control. The agreement dictates how the information can be used or shared. This is crucial when planning your business exit and sale
Looking for a handy checklist that will walk you through all that’s needed when preparing your business for sale? We’ve created one with all you need – and you can download it here.

What are the situations that confidentiality protects against?

It’s hard to think of a true monopoly. Every business has a competitor. That competitor is always looking for cracks in your operation to
  • steal your customer base;
  • steal your best staff;
  • take over your best supplier relationships.
If that competitor knew your business was for sale, you can bet they would be looking to exploit it. And, if they are successful in that, what will you have left for the buyer to purchase? What value will your business have without its best customer, staff and suppliers?
It is these aspects of competition in business that a confidentiality agreement (or Non-Disclosure Agreement or NDA) is used to protect.
So, when selling a business, every buyer you speak with should sign up to a confidentiality agreement as part of your business exit strategy. This is your protection as vendor that they will act professionally in your dealings with them.


How to keep keep the sale of your business confidential when you’re interviewing business brokers?

The short answer is that you can’t.
You can have a very high level, preliminary discussion about sales without disclosing your business data. However, if you want real advice on your business and your sector, a broker has to know what the business is. They are going to need to see your accounts, know your customer base, location and a lot more.
This is where having a personal recommendation to a broker from someone you trust, or who has used them before helps. If you haven’t got this, the steps in this guide will help your selection.
Radcliffe Building Supplies

Case Study – Radcliffe Building Supplies
A personal introduction to Radcliffe Building Supplies helped in cementing trust between ourselves and our client from the start.
Radcliffe’s were a well known and trusted name around Manchester, having first established in 1979. Add to this a freehold site with outline planning permission for development and we knew there was a lot to keep confidential. There were also some very big national chains who would be interested, but were also huge competitors.

What to include in an NDA

Most confidentiality documents or NDAs cover common ground. They can be one way, or unilateral. The main points to look out for are;
  1. The parties to the agreement. Who is sharing the information, and who is receiving it. Are these individuals or do they act on behalf of companies.
  2. The information which is protected. This typically covers all information shared with a buyer unless it is already in the public domain. So public accounts filed with Companies House would not be covered by the NDA.
  3. Restrictions on use. Normally the information is shared expressly for the evaluation of the business. Therefore, it cannot be used by the recipient to gain a competitive advantage.
  4. Exceptions to the restrictions in 3. Often the business advisors and lenders of the buyer are made an exception. This typically means solicitors, accountants, lenders and perhaps HR professional advisors. Your buyer needs to assess the business as a whole, perhaps how it fits with an existing business and what profits it is capable of in the future. To do this comprehensively, they will need specialist advice in some areas.
  5. Broker contact only. This may initially sound like the broker is being prissy about their role, but you don’t want your buyer talking with any employees, customers, suppliers, creditors, or landlords. Communication absolutely has to be in your control.
  6. Visits by appointment. As with 5, you want to keep control of when a person visits and for how long. You will be discussing confidential matters you may not wish your employees to hear.
  7. In perpetuity. That the conditions of the NDA will remain in force for a period of time, often around 2 years, but sometimes in perpetuity. This not only protects the business whilst you sell it, but it also offers protection for the eventual buyer from others you shared sensitive information with.
This is not a finite list. Your business may have particular protection needs, so seek professional advice.
Confidentiality of a business sale


How to keep the fact that you’re selling hidden from competitors, clients and staff?


When using a business broker to represent your sale, you are already injecting space between buyer and business. The broker is the main contact. 
For competitors, it is possible that they will be surfing the business sale websites. It may be that one is a perfect buyer for your business, but it needs correct handling.
The advertising description of the business needs to be enough to entice buyers to engage, but not too much as to identify the business. There should be a degree of ambiguity.
Some staff may need to be in on the sale. They offer specific functions fundamental to achieving a sale and we look at this in more detail in this article.
Customers are usually not a problem if advertising is well written.
If someone does approach a you to say they’ve seen a business like yours advertised for sale, remember they’re fishing for confirmation. They don’t know for sure it’s you. They are watching for a reaction. To see if they are the great detective they think they are, and you can respond in one of two ways.
  1. Take the line that your business is for sale for the right price. If Richard Branson made you and offer today, you’d snap his hand off. Make light of it. Joke. Every business has a sale price.
  2. Divert it to the wider market. Mention direct competitors. “Oh, I wonder if that might be XYZ down the road, they are well into they’re of retirement age”, or similar comments help.
Case Study – Radcliffe Building Supplies
It won’t surprise you that Radcliffe Building Supplies was based in Radcliffe, Greater Manchester. We couldn’t advertise the business location of Radcliffe. That made it obvious. Couple location with the age of the business, it’s size and the freehold, we felt it would still be identified with a Greater Manchester location. We also wanted to entice the national chains.
Our advertising strategy was to keep initial information to a brief flyer . The advert title “North West Builders Merchant for sale” protected the business identity and location. By selecting North West as the geographical description, it presented far too many options to narrow it down to one.  
As for staff, one trusted member of the accounts team was brought into the sale process early on. They supported the owner in production of the necessary reports buyers would need as well as providing role of confidant for the owner.

How to share financial information in confidence during a sale?

It is simple to extract the key figures from company accounts and transfer them to an anonymised spreadsheet.
One common measurement which allows a buyer to compare financial performance against other companies is EBITDA. At the very least, you should put this together for your buyers, and with at least a 3 year trend.
That is enough information in a first instance until you are happy that you are dealing with a committed buyer. Nothing confidential released and all names and locations removed. 
Buyers want to know a more information than can be given. They have to be patient, and serious buyers are. They also know that confidentiality works in their favour, if they do become the successful buyer.
Imagine you were the person who bought Coca-Cola or KFC?
How pleased would you be to find out that Pepsi or Nando’s had shown an interest in buying. That they had seen the secret recipes. Then dropped out of the bidding.
As the ultimate new owner, how protected is the business you’ve just invested in when its core secrets have been seen by others?
So even with confidentiality agreements in place, some commercially critical data is not handed over until after the deal completes.
Confidentiality is there to protect the buyer as well as the vendor.


Case Study – Radcliffe Building Supplies

The business was bought by Beesley & Fildes. At the time, a growing builders merchants with a number of branches in Merseyside. They saw the benefit of expanding into Greater Manchester.
Geographically, they were not a direct competitor, but they did have the size, skillset and plans to expand and grow. This was quickly established during the early vetting calls.
Throughout the negotiations, the buyers were respectful of confidentiality and communication channels. All in all, the sale went through very smoothly and Beesley & Fildes have continued to expand, now with 11 locations at time of writing.

Caution with confidentiality agreement

A cautious conclusion

It is fair to say that a confidentiality agreement is not iron clad. If an unscrupulous person chooses to break its terms, you then have to pursue them through legal channels to make amends. Nightmare. What it does do is serve as a remind to professional people of their duties.
What actually offers you most protection is the vetting process of experienced brokers. Confidentiality is always at the forefront of a brokers mind during every conversation they have. Their very job is to look after your information because it makes it more valuable to the buyer. If something doesn’t add up, their 6th sense kicks in and barriers go up. Everything is planned ahead

Case Study – Radcliffe Building Supplies

It was our job as broker to qualify people. When we got a call from a single builders merchant in Carlisle, they may have been looking for a 2nd location, but Radcliffe was unlikely to be it. Nor was it likely that a business within 5 miles would be good. Too close. With these vetting conversations, we were able to eliminate a good number of buyers without releasing so much as the business name.
Further vetting conversations cover intent to buy, financial position and even conversations about merging operations post purchase. All come together to provide a picture of ability to buy confidential information is released.
If you would like to discuss your specific confidentiality requirements, get in touch.

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