The business press announced in February 2014, that Comcast was purchasing the cable business of Time Warner. As two public companies, such an acquisition must be made public according to the rules of the SEC. If it even happens, the process will take months but already customers are concerned about rising prices, content providers are concerned about access and employees fear losing their jobs. Fortunately the same need not be true for the sale of privately held businesses.
The number one concern we hear from business owners is how a potential sale or even the discussion of a potential sale of their business will be kept confidential. Lack of confidentiality can cause customers to delay new orders, employees to be demoralized, distracted, or even leave, and suppliers to be concerned and give an edge to competitors. In a private business sale, all of these concerns can be mitigated for two reasons. First, unlike public companies, private companies have no obligation to announce an impending sale and second, a properly managed process can preserve confidentiality and eliminate the concerns of employees, customers and suppliers.
Experienced business intermediaries have policies and procedures in place to protect the confidentiality, including blind marketing, buyer screening, and the use of non-disclosure agreements. However, the sale of a business can involve a number of outside people including accountants, attorneys, insurance agents, landlords, shareholders, and possibly family members.
Generally, professionals such as accountants, attorneys, business brokers, and investment advisors are fully aware of confidentiality needs as their own businesses depend on it. However, the best practice is to apprise anyone who needs to know about the sale, of the need for strict confidentiality of the pending business sale. Beyond professional advisors that are important early in the process, all others should be on a “when need to know basis.” Insurance agents and landlords are usually not communicated with until late in the process nearer to closing. Employees, customers, and suppliers are generally never told until after closing when the new owners are introduced. Some clients have felt uncomfortable not telling employees in advance; however, it has been our experience that doing so only causes problems and unnecessary worrying. One of the goals of the business sale process is finding buyers that everyone will be comfortable with and will carry on the success of the company. Unlike mega acquisitions like Comcast and Time Warner, buyers in smaller acquisitions are concerned about keeping all of the employees and layoffs are rarely a part of the equation.
While confidentiality can never be 100% guaranteed, a properly managed business sale process will preserve confidentiality and most importantly will preserve relationships with employees, customers, and suppliers.
UPDATE: On April 24, 2015, the proposed merger between Comcast and Time Warner was abandoned by Comcast due to objections from the federal government. In October of 2016 AT&T and Time Warner announced a merger which is expected to close by the end of 2017. This represents almost four years where Time Warner employees were concerned about the uncertainty of their future. In the small and middle markets deals can also fall apart leading to the need to negotiate with a new buyer, however, maintaining confidentiality can save your employees from the angst likely felt by the Time Warner people.