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The possible sale of a business is always handled in strict confidence

Posted on Jun 09 2017, in Resources for buyers

On occasion, we as business brokers are faced with perplexed potential buyers of businesses, who don’t always appreciate the reasons why business sales are handled in the strictest confidence

This is the complete opposite of a house sale. With the sale of a house, the agent publicises their mandate far and wide – and tells anyone and everyone about it.

Potential business buyers are then perplexed when they phone up and for example ask the “address of the business because they just want to go and have a look”, or “just want to know if it is close to an area that suits me”, and the business broker says NO!!

A business broker cannot give out the confidential information about a business to just anyone – we need our potential buyers to prove their bona fides before this can happen. This involves the signing of a Non-Disclosure Agreement (NDA), and probably a few other steps as well.

So why the need for confidentiality?
A few basic reasons are:

  • Key staff members may resign if they find out, or they may change their work performance, as they fear the consequences of new ownership
  • Suppliers to the business may fear they aren’t going to get paid – and so change their terms of doing business
  • Customers may take their business elsewhere – they may suspect reduced performance or quality from new ownership
  • Competitors may use the information to spread negative rumours about the business

So the lesson for the potential buyer is simple – get to know your broker and realise that doing so will imply a different process than getting to know a real estate agent.