Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

February 9, 2016

A Breach Of Confidentiality Could Spell Disaster

By Joseph Eneldas


Undoubtedly, maintaining confidentiality throughout the process of selling a business is one of the most important aspects of a business transaction. Some contend that confidentiality is THE most important aspect, often even exceeding the value determination.  Why so?

“Simply stated,” says Frank Arcoleo, Managing Director, Central Pennsylvania and New York, of A Neumann & Associates, LLC, a leading Mergers & Acquisition and Business Brokerage firm headquartered in New Jersey, “a breach will result in all kinds of negative outcomes, including the loss of customers, the loss of employees, and the loss of access to bank credit.”

The first impact of a breach will be the loss of customers.  This is particularly significant in consumer hospitality businesses with long-term client reservations, such as banquet facilities.  The “news” that a banquet facility is for sale will result in immediate cancellations, essentially destroying future business revenues.  More significantly, it applies to manufacturers that “control” a significant percentage of a customer’s product sourcing.  Any potential risk pertaining to the continued reliability of product deliveries (due to a change in ownership) will most certainly trigger those customers seeking alternate product sources.

Another aspect is the loss of a competitive advantage.  “If a particular manufacturer has a pricing or design advantage, information leaks regarding a pending sale will almost universally lead to the need for the manufacturer to price match competitors to ‘keep’ those customers,” says Achim Neumann, President, “As a result, the breach of confidentiality will immediately deteriorate profit margins.”

Finally, there is the probability that certain key employees will leave – particularly, the ones most important to the business.  Generally, employees do not like uncertainty and are prone to imagine the worst from a transfer of ownership.  And if they just happen to have recently heard from a recruiter or competitor, this could very well be the triggering event for them to “jump ship.”

It is important to note that the “fear of the unknown” PRIOR to a sale is the most negative aspect, not the actual transfer itself.  Businesses for sale hit the market every day, and if done properly, there is no negative impact on clients, pricing, margins, and future business growth.  It is the uncontrolled negative perception PRIOR to a transfer that needs to be avoided at all costs.

Importantly, this applies to both business investors and business sellers.  “Quite often, we are contacted by business investors who actually want to work in the business or who want to contact certain key customers prior to closing,“ says Aaron Soury, Managing Director Southern NY State, “and we need to explain to these folks that doing so would only jeopardize the well-being of the business they are looking to acquire.”

So how can the confidentiality breach be avoided?

First of all, all marketing needs to be undertaken in a non-divulging fashion.  The name of the business or its address should never be stated in advertisements or postings available to the general public.

Secondly, a process needs to be in place to carefully vet potential investors. This needs to include a thorough financial qualification process, not simply the signing of a cursory Non-Disclosure Agreement.

Finally, not all information should be released in the first meeting or even in the first documentation set. “Selling a business is like leading a horse to water” is an often used phrase in the industry, and indeed it’s largely correct.  Only after an offer has been submitted and an escrow account funded (thereby indicative of an investor’s serious interest) should details pertaining to customers, employees, etc., be revealed.

In sum, maintaining confidentiality is crucial in selling a business, and only firms with established processes and a long history of successfully executing such steps should be considered by any business owner contemplating a sale.  The professionals at A Neumann & Associates would be happy to discuss our time-proven process in detail with any interested party


About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional merger & acquisition and business brokerage with more than 30 years of experience in Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland and North Carolina that assists business owners and buyers with the business transfer process in a completely confidential manner. The company is affiliated with national networks of qualified buyers and sellers. For more information, please contact A Neumann & Associates at 732-872-6777.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or

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“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

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Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer
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If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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