Confidentiality is one of the first words you will discuss with a business broker for manufacturers San Diego trusts. But what is it about? Are you wrong to demand it? In this post, we will be taking a look at why confidentiality is necessary when selling a manufacturing company.
Confidentiality is the cornerstone of the sale or purchase of a company. As a result, a confidentiality agreement starts from the first moment you meet up with a potential buyer. It is important to provide potential buyers with the necessary information that shows your company is for sale but also stress on them keeping everything a secret through a confidentiality agreement. With this level of transparency, you will avoid suspicion arising thus reducing the likelihood of them leaking information about the sale to their colleagues or to the public.
While confidentiality allows the parties to share information without leaking the information to external parties, you cannot rely on verbal promises. To guarantee confidentiality is maintained, you need to draft a non-disclosure agreement. This is a legally binding agreement that keeps potential buyers from sharing the information you disclose to them with anyone else. An experienced business broker for manufacturers San Diego will be able to draft an NDA that covers every aspect. Moreover, a business broker will take time to pre-qualify buyers before sharing any information with them.
Maintaining confidentiality throughout the sale is very important. This is more so when you consider the role played by new technologies which make information more accessible and easier to share. Signing a non-disclosure agreement obliges all the parties involved to monitor compliance with several obligations that relate to the transmitted information. The NDA burrs parties from sharing information not just in the present but also in the future. Non-compliance by any of the parties can affect the operation’s development and closure negatively.
What happens if information is leaked?
When information is leaked, there are many issues that can follow.
- Variation of transaction price
A rumor can cause the market to change the price of a share. The case is the same in the sale of a business. If information is leaked, employees can exit, shareholders may withdraw and so many issues can follow that cause the value of a business to decline.
- Exit of key professionals
In fear of the unknown future, if rumor spreads about the sale of your company, you may lose key professionals. This may distract operations and even cause buyers to back out.
- Confusion in the workforce
Rumors of a sale can generate nervousness among the employees. This will impact work performance.
- Concerns of customers and suppliers
News of transfer of ownership can cause customers and suppliers to grow cold feet. This is because they don’t know if they will approve the new owner.
A lot can happen if confidentiality is broken. That is why you need the help of an experienced business broker for manufacturers in San Diego to help with confidentiality management. The fewer the number of people know about the sale the better.