Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

February 9, 2022

Why Confidentiality is Paramount

By Marc Gudowitz

One of the most critical aspects to executing a successful sale of a business is maintaining confidentiality throughout the entire process. This concept may seem obvious to some, however a breach of confidentiality can negatively affect the selling price, derail a deal altogether and cause irreputable harm to the business itself. It is for these reasons that it is imperative that you and your M&A Advisor take all the right steps to protect your confidentiality from the very first contact.

What can go wrong?

Employees are the lifeblood of your business. They are an essential part of your day-to-day operations and will be a valuable component to the new ownership. Not only is the timing important regarding when you advise your employees that you are selling your business but how the news is presented is equally important. If somehow the news leaks out too soon, some employees may become spooked and look to leave. Self-preservation is human nature, and if employees perceive that their jobs are in jeopardy, they will look for stability elsewhere. On the other hand, if the information is presented properly at the correct time during the transaction process, they can be assured that their personal interests are aligned with the new business owner’s. Instead of fear and paranoia, they will feel secure and excited about their new opportunity.

Customers want to know that the companies they do business with have a solid foundation and will be there in the future for any needed support. If your customer base prematurely hears rumors about your company being on the market, they will immediately fear the worst and become concerned about the company’s viability. They will then start searching for alternative suppliers in an effort to protect themselves. Properly planned and timed announcements, however, will have the opposite effect. The customers, being fully informed of the situation and properly introduced to the new ownership will feel comfortable and secure moving forward.

Vendor relationships are built and nurtured over many years. There are few things that can wipe out those many years of goodwill faster than a vendor catching wind that that a company is for sale. Deliveries could be suspended, and credit lines could be terminated. All this because proper steps were not taken to assure confidentiality. With the guidance of your M&A professional, disclosing the details of the sale to your vendors at the right time will assure continuity and the proper transfer of the goodwill that you worked so hard to build.

Negotiating Leverage with potential buyers will be lost if word gets out that the business is for sale. Once the confidentiality is breached during the negotiating and due diligence period, the seller’s position is significantly weakened. Obviously, this is a position that the seller will want to avoid at all costs. Proper preparation and direction from your M&A professional will help to protect you from this situation and maximize your return.

What can be done to maintain confidentiality?

First and foremost, hire a qualified Advisor. In addition to providing essential guidance, leverage and resources, hiring an intermediary will enable you to detach yourself from the process and will allow your M&A Advisor to act as your buffer. It is impossible for you to maintain confidentiality if your name and number are listed as the direct contact as you attempt to market your company. A qualified M&A Advisor will take the subject of confidentiality seriously. Make sure to discuss this when interviewing your advisor to assure that your priorities align with each other.

Keep your inner circle small. The fewer people that know of your intentions to sell, the easier it will be to keep that information quiet. Discuss this with your M&A Advisor to determine and confirm exactly who is aware of your intentions and who is not.

Proper marketing documents are essential and will enable your M&A Advisor to properly and aggressively market your company while maintaining your confidentiality. A Blind Profile will be developed to share just enough about your company to pique apotential buyer’s interest without giving away the identity of the company. A second document called the Confidential Memorandum will also be developed by your advisor for interested parties that would like to take the next step, and as its name infers, will share more intimate information about the company for sale. However, this Confidential Memorandum should not be distributed freely.

A strict vetting process should be executed before the Confidential Memorandum is shared. This process should include a strong Non-Disclosure Agreements (NDA) along with financial and managerial background checks. This will not only protect the business owner’s interests by maintaining confidentiality but will weed out the seriously interested parties from the “tire-kickers.

Communicate discreetly. Use your private cell phones and make sure your phone calls cannot be overheard. Use personal email accounts to communicate with your advisor. Having your advisor/intermediary manage the process will help to insulate you. When it comes time to meet potential buyers, try to meet off-site or after-hours when employees are not around. Also, be aware and be diligent in not leaving any paperwork, business cards or notes where they can be seen. Paying attention to these details will enable you to maintain confidentiality until the transaction is successfully completed.

Selling a business, in most cases, is the culmination of many years of hard work building and nurturing your business and should be a one-time event. Executing a successful sale of a business involves a complicated and detailed process which requires the coordination of many moving parts. Maintaining confidentiality is a critical piece of the process that cannot be overlooked. All aspects of the process as mentioned above need to be carefully planned and implemented. An experienced M&A Advisor will properly drive this process and in doing so will make sure all the appropriate measures are taken to protect your confidentiality leading to a successful sale that will maximize your financial return.

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 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

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, 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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