Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

April 10, 2017

Is Confidentiality Even Relevant in Selling a Business?

By Jeremy Albelda

Business

Transactions in small to mid-sized businesses must be kept confidential. In particular, every effort must be undertaken to keep a pending sale unknown to competitors.  But even the circle of employees in the need-to-know realm should be limited to an absolute minimum of the most trusted team members, if any at all.

So why is confidentiality so important?

The knowledge about a pending business sale has an impact on vendors, employees, banks, landlords and most importantly, customers. Generally, no individual likes change – the fear of the ‘unknown’. In the case of a business sale, however, this can have a significant negative economic impact.

Specifically, vendors will be concerned about receiving payments, employees fear lay-offs, and banks are concerned about the servicing of loans. Most importantly, customers will start to invite competitors to bid on their business in order to secure product/service sourcing in the future. Worse yet, the longer the time span between a breach of confidentiality and a deal closing, the worse the impact will be from any one of the stakeholders above – with a direct impact on the performance of the business and deal value.

Thus, one key objective of the marketing documents—in particular, the blind profile, is to maintain confidentiality with respect to the sale of the business, preventing stakeholders from learning about the sale.

“Many years ago, we were approached by a roofing company,” says Achim Neumann, President, A Neumann & Associates, LLC, a New Jersey based M&A advisory and business brokerage firm, “which served commercial customers, was unionized, and located in a particular state on the East Coast. It took us quite some effort in explaining that if we were to mention these four criteria, competitors might easily be able to identify the business through the simplest investigation.”

Thus, an inexperienced advisor – often so-called ‘industry specialists’ – would clearly have lacked the experience in this example to write a blind profile without essentially divulging the identity of the company. Such ‘experts’ are simply lacking comprehensive confidentiality procedures to prequalify a broad segment of investors properly.

Even after a deal has been agreed upon with an investor, it is important that the confidentiality is fully warranted during the due diligence phase. We have advised many business sellers that all negotiation leverage will be lost once confidentiality is breached, leaving the seller in a very vulnerable position. With approximately 25 percent of all initiated deals not completed for one reason or another, sellers most certainly would not want to have customers, vendors, or employees knowing about the business being for sale.

In conclusion, confidentiality must be maintained all the way until checks have changed hands at the closing table – sometimes even beyond that.

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

“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

“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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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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