Keeping A Business Sale Confidentiality Agreement (2023)
Written by: Patrick Findaro
Table of Contents
Some businesses benefit from a public sale announcement. For example, famous establishments or historical landmarks could have a higher selling price from such an announcement. However, this approach may not apply to normal businesses. It is fundamental to keep a business sale confidentiality agreement of selling a business and ensuring that the exit strategy stays intact.
There are several ways that the announcement of a business could trigger negative responses. For example, the consensus from creditors or competitors may weaken the business position and its value, leading to unenthusiastic potential buyers from listening or reading from the shared information. Business brokers can help reach prospects needed to sell a business, without mentioning the business name or the owner. However, if you decide to sell your business on your own, you must take several steps to maintain confidentiality.
Seven steps to ensure a sale confidential
Non-Disclosure Agreement
A Non-Disclosure Agreement (‘an NDA’) is the best way to protect the information concerning the sale of your business. You can be founded this online or have one created by an attorney. It is vital to not allow information about who you are or the business you intend to sell to leak out before the potential buyer signs the agreement.
Make sure to include protection clauses for yourself and the buyer with an expiration date.
Blind listings when advertising
It is important to not share personal contact or business information in advertisements when you wish to sell your business. You should only reveal this information once you obtained the confidentiality agreements. Blind ads use headlines that will promote the business’s strength while not mentioning the name.
Create a separate email account that is not linked to a business, such as Shop4sellNY@email.com, to show limited information. It is also vital to remember to use traditional media areas, such as PO Box. If you choose to list your business for sale on an online site like Vetted Biz, use the site’s protection features to protect the business and your identity. It would be a necessary tactic, setting up a contact telephone number with no connection to your business or name. This might be useful to avoid contacting competitors.
Prequalify buyers
It is also time-efficient to screen potential buyers to protect your confidentiality. You can such as requesting for their information, their financial and business background. If a qualified buyer is serious about the business purchase, then he or she must provide their information. And keep the information about you and your business private.
Create selling memorandums with numbered copies
Once qualified buyers have been identified, and the confidentiality agreement has been signed, you can provide them with the selling memorandum with its unique identification number. There gives out a detailed overview of the business and its positive purchasing aspects, or the offering memorandum. Remember to add in the footer of each page a reminder of the terms of the confidentiality agreement. And that violation to comply with the agreement could lead to legal consequences.
Letter of Intent
It is wise to only provide information concerning the business in steps. Even when the buyer signs the confidentiality agreement, he still must show their ability to purchase the business. Then, you must provide an offer through a Letter of Intent before sharing any trade secrets or proprietary information.
Neutral ground for meetings
It is also a good idea to meet with potential buyers off-site. Especially at the office of your attorney or broker. This is util for avoiding as much suspicion as to who the person is that you are meeting with.
Involve only required people
There may come a time when you needed the assistance of a key employee for tasks such as due diligence. So it is important to explain to them the need for confidentiality. The meeting should only take place with the right people. And the right number of people to minimize chances of a breach of confidentiality.
Provided the above points, it is still an extremely difficult task to sell a business on your own with confidentiality. For business owners that value confidentiality and their time, it is wise to engage the services of a business broker.
