What is discretion?
In the following article, we define the concept of discretion in the context of selling a business as we understand it in InCorply.
To put it simple, discretion is a sale of a company in a way that does not disclose information identifying the company being sold. The specific company involved will only be disclosed to a qualified potential buyer under a non-disclosure agreement. This ensures that only those with a serious desire to buy are aware that a particular company is for sale, in addition to the owner and transaction advisor.
Why is discretion important?
We've discussed the importance of discretion in one of our earlier blog post, but let's once again review the most important risks of why "secrecy" often makes sense when selling your business.
It is certainly not possible to say that a company must always be sold in disguise. However, InCorply's experience confirms that this is generally reasonable. If at least one of the following risks could be realized in the case of a sale of a business, a discreet approach should be preferred.
Risks associated with a public sale:
Potential buyers share information or agree on dumping. In particular, it ultimately means a significantly lower price that they are willing to pay. This situation usually arises in a narrow area and/or when the number of potential buyers is very limited.
Company employees may become anxious and quit due to uncertainty about the future. It is known that this is relevant even if there are no plans to sell the company.
Competitors may spread the news of selling to customers from an angle that casts doubt on the sustainability of the business being sold. It will definitely not benefit the business or sale of the company. The situation may become even worse if competitors also start to attract the company's employees. In this case, the competitors will get the customers already for free.
Customers and suppliers value the stability of their partners. If the information about the sale of the company reaches them through third parties, it can, in extreme cases, lead to the termination of the partnership.
Thus, if the plans to sell the company are publicly known, in the worst case scenario, it will no longer be possible to sell the company or continue the business after some time.
How to ensure discretion?
How to start the sales process without having to worry about the dangers of spreading information? If the information cannot be published, how do you know if anyone wants to buy the company and at what price?
It is clear that the owner cannot sell his own business in disguise. In order for the company's name not to be public, but for all critical information to find the best buyer to be published, it is wise to involve an experienced business sales consultant in the process. A good consultant has the knowledge and experience of:
- how to compile sales materials so that a potential buyer can find information corresponding to the key indicators of the sector and answers to questions that interest them
- how to identify potential buyers and how to reach them
- how to organize all initial communication with potential buyers and with whom to conclude a non-disclosure agreement to start negotiations
- how to represent the company within the exact agreed mandate and in such a way as to ensure the best possible purchase offers
The role of such a consultant is certainly not rocket science. However, in the case of an inexperienced consultant, the risk of scaring a potential buyer away is real one. Although even the best consultants cannot work miracles, it is wise to have a professional represent your company - someone with sufficient negotiation experience and knowledge of the specifics of the sales process.
Today is a good time to sell a business in many sectors. If you are planning to sell your business and for some reason it is unreasonable to sell it publicly or test the market, we recommend doing so in a way where discretion is ensured. It certainly doesn't guarantee a buyer at a dream price, but if you decide to withdraw from sales for any reason, conduction the sales process descreetly is the only thing that will allow you to continue doing business as usual.
| Mati Maasik mati.maasik@incorply.ee |
