How to Balance Transparency and Confidentiality when Selling a Business

“Confidentiality and transparency are not mutually exclusive, but rather two sides of the same coin”               – Thomas de Maiziere.

Good leaders know that transparency is a key factor in building a culture of trust between an organization and its employees, as well as attracting and retaining the best talent.  Transparency is essential to building a cohesive, high-performing team but when selling a business, too much transparency, too soon, can result in complications and potentially kill a deal.

Transparency is a leader’s commitment to a principle of sharing how the employees’ role within the company is critical; the direction of the company; goals, and timelines.  There are many positives to creating a culture that embraces transparency, respect, and honesty. A greater level of business transparency between an organization and employees can lead to greater loyalty, strong teamwork, and greater shareholder return.

Transparency, however, does not mean sharing every detail of a business, all the time.  Leaders and business owners would be remiss to have an overarching commitment to transparency if that model was detrimental to the business and stakeholders.  Good leaders also have a good sense of boundaries.

When selling business confidentiality is of utmost importance for many reasons including employee retention and smooth transition of the business to new ownership.  If vendors, creditors, or employees learn that your business is for sale they could become nervous about the unknown. This uncertainty can cause parties to distance themselves or leave an otherwise thriving business, which can negatively affect the health of an organization. This potential decline could make a buyer reconsider the value of the business and have second thoughts regarding the sale.

Ultimately, the best way to ensure an appropriate amount of information is disclosed is to hire an intermediary with experience in maintaining confidentiality: a business broker.  Business brokers are the main point of contact for potential buyers. Business brokers field calls from any interested parties including buyers. This minimizes the risk of a buyer or bank calling the business and alerting employees to an owner’s intention to sell. Minimizing the potential interaction between interested parties and employees allows for owners to focus on the continuing health of the business, instead of worrying about maintaining confidentiality.

In addition, brokers control access to information regarding a business; they will have interested parties complete an NDA before releasing to them any information including the business name. Control over sensitive information does not end after an NDA is signed. Business brokers ensure that buyers only have access to sensitive financial documentation as needed. This restricted access allows for buyers to have confidence in the level of confidentiality surrounding the deal.

Business brokers have a wealth of experience and tools to ensure the necessary balance of transparency and confidentiality is met. Business brokers allow buyers the transparency they need to make an informed decision regarding the sale of the business while protecting the buyer’s confidentiality.