The Importance of Confidentiality: A Real-World Example
Selling a business is a high-stakes game where a single slip of confidentiality can send ripples through an organization, causing panic, uncertainty, and devaluation.
What happened? A business owner quietly explored a sale and held a few private Zoom meetings with IEI Advisors. Everything seemed to be going smoothly, until IEI’s managing partner, Peter Flippen, noticed an unexpected viewer on his LinkedIn profile: a key employee from the “for sale” company.
This wasn’t a coincidence. The employee, curious or even suspicious, had stumbled upon clues that a potential sale was in the works. As it turned out, the owner had overlooked a crucial detail—his calendar wasn’t set to private. Employees could see scheduled meetings with IEI, and (as they say), the cat was out of the bag.
Did you know that news of a potential sale, even if not yet finalized, can create instability? Employees may get concerned about job security which can effect morale or even worse retention.
Maintaining confidentiality is as much a precaution as a necessity. Here’s the rundown on how to do it right.
Top Tips for Maintaining Confidentiality
1. Protect Your Calendar and Workspaces
Business owners often underestimate the watchful eyes of their employees. Whether an executive assistant glancing at the calendar or a curious team member noticing a confidential document on a desktop, small oversights can lead to significant leaks.
Keep your meetings private. If you schedule discussions about a potential sale, mark them as private on your calendar so they don’t appear to employees with shared access.
Beware of “shoulder surfers.” Employees can sometimes unintentionally (or intentionally) see what’s on your screen. If you regularly work on sensitive documents, consider using a privacy screen on your laptop or positioning your monitor away from prying eyes.
Don’t leave documents lying around. If an employee spots a printed NDA or valuation report, they may start connecting the dots. Lock away paperwork related to the sale.
Remember—the most minor slip can spark office rumors that spread faster than wildfire. Once that happens, you lose control of the narrative.
2. Use a Code Name for the Sale
If employees frequently glance at your emails or if you’re worried someone will accidentally see a subject line that raises questions, consider using a code name for the deal. A simple change in wording can prevent an employee from making an accidental discovery that derails your plans.
Choose something neutral but not suspicious. If you name it “Project Secret Deal,” you’re only fueling curiosity.
Opt for something unrelated to your business industry. Names like “Project Cooling Tower” or “Operation Bluebird” are less likely to trigger suspicion than something like “Project Business Sale.”
Ensure your attorney, CPA, and advisor know to use the code name in communications. Maintain secrecy, privacy, and consistency.
3. Require NDAs from All Potential Buyers
If you wouldn’t hand over your company’s financials to a stranger on the street, you shouldn’t disclose sensitive details to potential buyers without an ironclad Non-Disclosure Agreement (NDA). While an NDA won’t eliminate all risks, it will provide legal recourse if a prospective buyer attempts to misuse information.
Use an NDA specifically tailored for mergers and acquisitions. Standard NDAs may not cover key aspects like non-solicitation of employees and customers.
Have your attorney review any modifications that a potential buyer requests before agreeing to changes.
Be selective. Not every inquiry deserves access to your confidential business information. Some buyers are fishing for data instead of striving to make a serious deal.
4. Be Strategic About Employee Disclosures
The old saying “loose lips sink ships” couldn’t be truer when selling a business. The moment employees find out, they may panic, quit, start job hunting, or jump ship with competitors. That’s why disclosure needs to be handled with care, caution, and precision.
Who should know first?
Generally, the CFO or controller is the only person who may need to know earlier than anyone else, especially if financial analysis is required. If you need their help, consider offering a closing bonus as an incentive to keep everything under wraps.
Key employees? Not yet. Avoid telling senior management until after you’ve signed a Letter of Intent (LOI). Even then, consider waiting until due diligence requires their involvement.
When to tell everyone else:
·The next layer of key employees, like senior managers and department heads, should be informed a day or two before closing. Disclosure will help them feel valued, enabling a smoother transition.
Most employees will find out on the closing day, typically during an all-hands meeting led by you and the buyer.
Miscalculating employee disclosures can be detrimental to your business. If employees find out too early, the uncertainty can trigger fear, disengagement, and resignations, which could make the sale less attractive to a potential buyer. Keep your lips sealed until the right moment.
5. Hold Meetings Off-Site Whenever Possible
If there’s one way to raise suspicion, it’s by hosting a parade of unfamiliar suits in your conference room. Employees notice unusual visitors, and that leads to rumors.
Whenever possible, meet with serious buyers off-site to keep discussions low-profile. For discussions with advisors or attorneys, consider neutral locations like private office spaces or executive suites. If a potential buyer wants to tour your facility, schedule the meeting in the evening after employees have gone home for the day.
Maintaining confidentiality for your business sale isn’t about deception. It’s about controlling when and how the news is revealed to avoid negative reactions until you have a done deal. Safeguarding Your Business Sale for a Smooth Transition
Maintaining confidentiality is crucial in a business sale to prevent employee panic, customer uncertainty, and competitor advantage. To summarize, you should protect your calendar, use code names, and secure all documents. Require NDAs from potential buyers, limit employee disclosures to necessity, and always hold sensitive meetings off-site to avoid suspicion.
A confidentiality breach could endanger your business, so maintaining discretion can ensure a stable transition. Your aim should be to protect your business integrity while maximizing the sale’s success, so stay proactive and private to secure the best possible deal.
Co-Authors: Peter Flippen, IEI Advisors and Valerie Mellema, Words You Want
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