Elon Musk’s intent to buy Twitter has been greatly publicized. As the owner of a distribution company planning on selling, you might be wondering if this is the way to go. The answer is a resounding NO. While making the sale of your company public can help attract more buyers, the drawbacks are severe. That is why any business broker for distributors San Diego trusts you speak to will recommend keeping the sale a secret. But why is that the case? To better answer this question, you need to understand the drawbacks of not maintaining confidentiality during the sale of a company.
Loss of Employees
The main drawback of making the sale of your company public is the loss of key professionals from your organization. When there is going to be a change in ownership, employees immediately get nervous about the future of the company. Will the new owner need them around? Will they be okay with the new management? What if the new owner chooses to shut down the distribution company to silence competition? These are all valid questions employees ask. As a result, most of them will start looking for greener pastures. Needless to say, the loss of key employees will disrupt operations. To avoid all this, your business broker for distributors San Diego depends on, will recommend keeping the sale a secret until the last minute.
Impacted Selling Price
The figures you get during a business valuation may vary significantly when you make it public that you are selling. This is because the loss of key employees will impact operations. This will in turn cause the value of your company to go down. In the case of Elon Musk and Twitter, on April 28th, Twitter’s stocks dropped after there were rumors of the purchase deal falling through. This caused the share price to fall to $48.26 all the way from $54.20. While the deal talks are confidential, shareholder pressure is pushing Twitter to sell.
While it is not possible to keep the sale of a publicly traded company a complete secret, what is happening to Twitter due to rumors demonstrates why it is important to keep everything a secret. Making the sale of your company public is not the best way because it causes significant transaction price variation.
Confusion in the workforce
If key employees leave, there will be a management void. This will lead to chaos. Rumors of the sale will also make employees nervous. As a result, this will lead to poor work performance. Consequently, the value of the business will decline due to poor performance.
There are many more problems that can follow including the exit of key customers and suppliers. Working with a business broker for distributors in San Diego to maintain confidentiality throughout the sale is the best way to go.