Are you a business owner wondering how to sell a business without anyone knowing?
There are a plethora of reasons you may wish to sell your business discreetly. As seasoned M&A experts, we understand.
We know the prevalence of unethical practices carried out by unscrupulous competitors who feign interest in the hopes of acquiring trade secrets. We’re also aware that some employees are considered redundant and end up retrenched. This is more than enough incentive to seek out a discreet sale.
But just how do you go about arranging a circumspect deal? Let’s find out.
The Case for Choosing a Suitable Market
The type of market you choose to take your business to does influence the level of discretion you can anticipate during the sale.
Now, what exactly is a market? Simply put, “market” refers to the different groups interested in your business or potential acquirers. There are three conventional markets and each has its pros and cons.
We’re going to take a look at these markets below.
And, for those pondering how to sell a business without staff knowing, it’s going to become quickly apparent that the first two markets fit their desire for a quiet sale.
Market A – Proprietary Deal
Potential buyer: 1
When only one acquirer is in the picture it’s very easy to keep things under wraps. It also means you only have to focus on dealing with a single entity as opposed to a handful of interested parties.
This is a dream situation for most buyers, giving them leeway to negotiate terms and conditions to their liking.
The major disadvantage to this setup is the leverage acquirers are furnished with. This can be abused to drive the cost of the business down at the same time while drawing out the sale over months in order to hopefully frustrate the seller.
Market B – The Dirty Dozen
Potential Buyers: 6 – 12
The majority of sellers do not like the idea of putting all their eggs in one basket as is the case with Market A but prefer instead to have at least a dozen natural acquirers to pit against each other.
With the help of a well-connected M&A broker, you can come up with a short list of likely buyers for your business that include your current partners and or industry rivals.
What’s neat about having a “Dirty Dozen” shortlist is that the people or businesses on the list tend to be people already in your circle. Folks who are familiar with the business. This is a pro because it means the sale can be expedited.
Great care must be exercised here if you’re going to invite competitors to the table. Remember, the more people who are aware of the sale, the harder it will be to keep the transaction secret for long.
Market C – The Fish Market
Potential Buyers: 100 – 300
It goes without saying that pushing your business before this market greatly magnifies the chances of the sale leaking to employees, vendors, and others you don’t wish to know. However, a bigger group can translate to better offers and faster closing times.
What are the downsides?
The most glaring one is the expense and time involved in trying to screen potential buyers.
The way most people work this market discreetly is by sending out an anonymous letter that gives an in-depth dive into the business. This introductory letter is devoid of all traces that can be used to identify the company. It may feature proxy phone numbers and email addresses for initial communication.
Those who express interest are then made to sign a Non-Disclosure Agreement (NDA) before more can be divulged. With the NDA signed you can then hand over the company memorandum.
Phone calls are typically arranged for those who’re really keen to keep pursuing the deal until face-to-face meetings are had. It’s around this time that offers are made, discussed, rejected, or accepted.
An attempt at closing a sale privately with a buyer from Market C is not impossible but the chances of news leaking are higher than with the first two markets.
Get Expert Help
Sun Acquisitions prides itself on providing sellers with a seasoned M&A team ready to assist, offer counsel, and advice about how to sell a business without anyone knowing.
To learn more contact us today.
Looking for more insight on selling a business? Check out these links:
- Mitigating Post-Closing Risks Through The Rep and Warranty Insurance
- How to Navigate a Buyer or Seller’s Initial Meeting
- Are You Financially Ready to Sell?
- Buyer Motivation – How to Confirm?
- Sell NOW – The Crystal Ball is Pretty Clear
Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.