Who Do You Tell, When You’re Going to Sell?

How to Keep the Transaction Confidential

Once you’ve decided to sell and initiate the sale process, one early dilemma you may face is who should you tell? ….And when? ….And what should you say?
 

In a nutshell, you want the business sold, but you don’t want anyone to know it’s for sale (except for just the actual purchaser!). For the majority of situations, here is some advice.
 

First consider and rationalize the risks. Who can hurt you? Typically, the risk areas are staff and customers. Eg. customers may leave you, staff may leave you, and competitors may be predators poised to seize both!
 

Although such concerns may be well founded, in many cases business owners can become paranoid about these risks. Generally, the more hands-on the owner is, the more risk there is when a change is proposed. So, first assess and rationalize the risks involved.
 

As Mark Twain once said: “I am an old man and have known a great many troubles… but most of them never happened”.
 

Often the actual risks are minimal and the real issue is the owner coming to terms with selling. Some owners don’t want to believe they are actually selling, because it creates too many unknowns or issues for them. Not telling anyone allows them to shut it out of their minds and forget they are actually doing it.
 

Our advice: There is nothing wrong with selling your business! Every successful business person will do it some day.
 

The biggest concern is that someone who trusts you might find out from others. This could make you wish you had told them earlier. Although Confidentiality Agreements are signed by prospective purchasers, you must assume they are of no value and that prevention is the best cure, just as with safety.
 

Even if you don’t tell your staff, they may know or find out anyway; and usually from the owner. 90% of communication is non-verbal, so you never have to say anything to actually tell them!
 

We often come across situations where the owners delude themselves that their team hasn’t been ‘officially told’, so it’s business as usual. Generally, although their key staff know or strongly suspect, they generally play ball and continue on as though they did not know. However, if you haven’t been a model employer, this is the time when your “chickens may come home to roost”.
 

Here is a menu of ways to tell your team, and when:
 
      • Tell no-one until the business is under contract. This may work, but generally astute staff would have realized what’s going on even if you haven’t already told them. Purchasers often ask if the staff knows, and feel more comfortable if they do know and are still there;
      • Tell no one until the sale is under way and purchasers are in motion. Even then, you may not want inspections during working hours, so as not to distract your team from their work;
      • Tell only your key people. They will become instrumental in the sale process anyway, as new owners will need to know who is staying and establish a mutual degree of comfort. They may also become key attractions to purchasers, which assists bringing the process forward;
      • Tell them early and tell them everything – run it up the flagpole. Tell your team and all your customers you are retiring/leaving. If you are past normal retirement age, they will have expected this, be genuinely happy for you, and offer to assist you and the new owners;
      • Advise them you are seeking external investors to take the business to the next level. This reassures them you will be around after settlement and the business will not fall out from under them overnight. In reality, Owners will generally be involved with the business for a retention/handover period after settlement;
      • De-sensitize timing. Tell them you are interested in phasing yourself out and will start looking for investors, that this could take a long time, and that you do not plan to go anywhere in the short term;
      • Emphasize the positives. In many cases a change of ownership provides an opportunity for staff to move up, with a larger organization with expanded career opportunities. A new corporate owner with greater financial capacity, growth plans and expertise in other fields, often creates much excitement throughout businesses which had been held back by owners near retirement.
 

To read the entire article, published by Divest Merge Acquire – Supertrac, click HERE.
 

The Summit Acquisitions Group — Business Brokers and M&A Advisors — specializes in the sale, appraisal, and financing of privately owned companies ranging in valuation from $750,000 to $25,000,000. Contact their offices in Atlanta, GA or Charlotte, NC for a free consultation.