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

“ 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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