We are often asked the question by potential sellers whether they should sell their business confidentially, or to go public. Let us discuss the options.
Some of the sellers we engage with have been told by their “auctioneer” {estate agent} that they should go public and have a big board outside the premises and a Daft advert with their business displayed for everyone to see. The negatives far out way the positives, and the 3 top negative reasons are:
- Loss of Control over Information: The commercial information released at this time is highly sensitive, and potentially open to malicious use by rival businesses. This can lead to a loss of control over how information is perceived and can impact negotiations.
- Employee Concerns: Announcing the sale publicly can cause uncertainty among employees, leading to potential disruptions in the workforce. Key employees might leave, affecting the overall stability of the business.
- Customer and Supplier Apprehension: Publicly disclosing the sale can make customers and suppliers nervous about the continuity and stability of their relationships with the business, potentially impacting revenue and supply chains.
What these 3 strong points lead to, is that you may have to heavily reduce your sales price because all these 3 points are closing in together and happening right in front of you. You need to put more hours in because staff are leaving, suppliers are pushing for cash upfront payments suddenly and customers start finding a different spot for their custom. If you were not under pressure to sell your business, you soon will be! Sadly, that impacts the most important aspect, THE PRICE!
But to be fair, let us look at the negatives of a confidential sale. A confidential sale does mean that you are limiting the amount of potential buyers that are in the market. It could also lead to a slower sale albeit to a more secure buyer and a higher price. It really all comes down to the level of urgency that the seller has. A confidentiality agreement {or NDA} is a must have in the case of a highly confidential sale. When a party expresses an interest in the business for sale, a Non-Disclosure Agreement is sent out prior to the release of the Sales Memorandum. The NDA is signed by the interested party and the agent.
Ultimately, the decision to sell a business publicly or confidentially depends on various factors, including the nature of the business, its market position, and the seller’s specific goals and priorities. What needs to be remembered is that “auctioneers” are not qualified business brokers, they tend to want to sell the lease, and a business has far more variables than just a lease. Unfortunately for the seller but fortunate for the auctioneer. Once the daft ad and large board outside is done and the mandate is signed, its easy pickings for them.
Call your DEAL CHASERS business broker to find out how to go about valuating your business and the possible marketing in a confidential setting. www.dealchasers.ie or call: 0818 183 037