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If
you're thinking of selling out, keeping certain aspects of the deal secret can
make or break the sale. Consider this scenario: During negotiations with a
buyer, news leaks out to your employees, vital customers and competitors.
Managers and customers jump ship and as a result, so does your buyer.
This
scenario isn't as far-fetched as it may seem, warns Domenic Rinaldi, a managing
partner at Sunbelt Business Brokers in Chicago, Ill, which specializes in
helping people buy and sell companies. "The implications of leaked
information during the sale of a division or company can be devastating, both
internally and externally," he says.
Rinaldi
recommends taking some precautions to safeguard the sale. For starters, he
suggests owners insist that all potential buyers sign a nondisclosure agreement
before allowing investigations into the company to begin. "These documents
are not complicated, but they need to be highly restrictive," advises
Rinaldi.
Clauses
should include guarantees that potential buyers (a) will not attempt to hire
any of your employees out from under you; (b) will not disclose in any way that
sales negotiations have occurred; and (c) will have only limited access to
proprietary information, such as technological secrets, during the
investigation.
Ed
Krajcir of Sunbelt Business Brokers of Wisconsin urges owners to take control
over the amount of financial information they release, especially during the
early stages of negotiations. "A seller should release the right
information at the right time. You don’t
want too much information out there, especially if negotiations fail to result
in a sale," says Krajcir.
He
strongly urges owners to release only financial summaries (rather than detailed
financial statements) in the beginning stages of putting together a deal.
There
are many other common blunders entrepreneurs make when selling a business.. In
addition to letting information leak, another common mistake is setting an
arbitrary price. Business brokers and mergers and acquisitions advisors
recommend a careful value analysis of your business with both the business
broker and your accountant. Setting realistic terms is also important.
Many
entrepreneurs try to go it alone in the selling process, but doing so can be a
costly error. Seek out sound business and legal advice from professionals who
are experienced with selling businesses. Selling a business, after all, can be
a complicated process and not one to take on without expert assistance.
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