Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

March 4, 2021

Confidentiality – Essential to The Sale of Your Business

By Jeremy Albelda

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If you are thinking about selling your business, then the importance of maintaining confidentiality cannot be overstated.  Along with proper valuation and preparation, discretion on the part of the seller and its team is paramount to a successful transaction.  Simply stated, a breach of confidentiality can result in many unwanted outcomes including employee anxiety, management exodus, and erosion of customer loyalty – all negatively affecting the marketability of the firm and the ultimate maximum value transaction that is desired.  Selling a business is not like selling a car or a piece of real estate – we cannot simply put an ad in the newspaper or a listing on MLS.

As Achim Neumann, President of A Neumann & Associates, LLC. and one of the foremost respected M&A advisors on the east coast, says in his 2017 book entitled The Road Beyond – What Nobody Tells You About Selling A Midsized Business, “Public knowledge that a business owner wants to sell will be bad news for the competitive position of the company.  Competitors will unquestionably exploit such uncertainty – competitors nearly always find out about direct negotiations if not handled properly.  A similar situation results when the employees or suppliers become aware that the business is on the market.  The seller loses leverage with both groups and reduces the goodwill value of the transaction.”

So, what can be done to avoid such an unwanted scenario?  A successful sale of the business can indeed be achieved in a discreet and professional manner – with complete respect for all involved.  Here are the 5 basic components to maintaining confidentiality before and during a sale of the business:

1. Tight Circle – Many business owners consider the company a “family”, and it most certainly is – a cherished team of managers, employees, suppliers, customers, and actual family members who all look towards ownership for stability and continuity. When it comes time for an exit strategy, the first impulse sometimes is to notify various team members and bring them into the process.  The exact opposite approach is needed.  Quite simply, the circle of people who are aware of your potential intentions should be as tight and limited as possible.  Gossip is a fact of life and anxiety can spread quickly – the less people who are aware of your intentions and involved in the process, the better.

2. Professional Team – It is imperative to have a qualified and experienced team of professionals in your corner as you research, prepare for, and ultimately execute a sale. This team usually consists of your CPA, a trusted business attorney as well as an experienced business broker or M&A advisor who should work together with you in the process.  This seasoned team will ensure that all steps are being taken to maintain confidentiality at every step.  One thing is for sure – if a business owner attempts to do everything himself, the word will get out and the sale will be undermined.

3. Proper Marketing Documents – A professional broker/advisor will formulate a thorough yet non-disclosing marketing campaign that will get the buyers attention without disclosing the identity of the business for sale. This is a key element of the process and must include the seller’s certification of the Blind Profile which is being marketed.  Purchasers often request more information than they are entitled to see immediately and will certainly do so without a qualified advisor facilitating the process.  The Blind Profile and all non-disclosing advertising language are an essential step in bringing the buyer and seller together without compromising confidentiality.

4. Strict Buyer Qualification – When a potential investor responds to a marketed business, it is imperative that they be subject to a stringent buyer qualification process that will include a full managerial background, financial disclosure, and well-written confidentiality agreement (often referred to as an NDA). This must be done consistently by your M&A advisor to ensure that you are only dealing with qualified and serious buyers who will honor the confidentiality requirements.

5. Discreet Communication – Finally, it is critical from the onset to be extremely diligent in the methods of communication. Personal emails, personal cell phones, off-site meetings, off-hours site visits, and a professional intermediary to coordinate all buyer/seller interaction in a discreet manner is essential to getting to the finish line and avoiding the negative consequences outlined previously.

As Mr. Neumann adds, “Transactions in small to midsized businesses must be kept confidential.  The circle of employees in the need-to-know realm should be limited to an absolute minimum of the most trusted people, if any at all.  Advertisements, buyer inquiries, and outreach to previous investors can all be handled in a fashion that conceals the seller’s identity or the location of the business.  Skillful buyer qualification and deft communication channels are essential elements of this process.  A breach of confidentiality along any of these lines will certainly lead to a significantly vulnerable and worse negotiation position for the seller.  By utilizing the proper team and a professional M&A advisor, the seller can protect his or her intentions until the very last moment and fully preserve the confidentiality of the contemplated transaction.”

Preparing for and deciding to sell a family or privately held business is a weighty exercise that calls for a thoughtful approach.  The execution of an efficient sale is a complicated process that calls for experience, discretion, and professionalism.  This is only going to be done once – it needs to be done correctly and with full confidentiality.

If handled with a small circle of family and professional teammembers, the business owner can indeed complete a maximum value sale without spooking employees, jeopardizing customers, alerting competitors, and undermining the attractiveness of the company.  Maintaining strict confidentiality through the elements described here is central to that success.

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 info@neumannassociates.com

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Client Testimonials

“ I appreciate your diligent approach to screening buyers and sellers as well as the high quality CIM that you produce.”

Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“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.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. 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. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi
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Contact A Neumann & Associates, LLC

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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