Handling Confidentiality
When selling your business, one of the most sensitive challenges is deciding when to inform your customers. While transparency with valued clients may seem like the right move, premature disclosure can disrupt relationships, jeopardize deals, and leak critical information to competitors.
Navigating how and when to inform your customers about the sale of your business can be tricky. In this video, we explore the delicate balance between transparency and confidentiality. Learn why timing matters, how legal agreements like non-disclosure agreements (NDAs) affect communication, and why disclosing too early can jeopardize valuable customer relationships and deal terms. If you’re preparing for a sale, this insight will help you manage client communications strategically while protecting your business’s value.
Here are key considerations and best practices to navigate customer communication during a sale:
Respect Confidentiality Agreements
Most sales processes involve signing a non-disclosure agreement (NDA) with potential buyers. These legal agreements restrict what you can share and when. Disclosing too early—even with your best customers—can breach these agreements and derail the deal.
Understand Customer Consent Requirements
Certain large customers may have contracts that require notice or approval before a change of ownership. In these cases, discussions should be carefully coordinated with legal counsel to ensure compliance without exposing sensitive deal details prematurely.
Preserve the Transferable Value of Your Business
Your customer base is a vital part of your business’s transferable economics—the revenue and relationships that a buyer expects to inherit. Premature disclosure could make customers uneasy, potentially prompting them to explore other options, which could decrease your company’s value.
Coordinate Customer Introductions with the Buyer
High-priority customers may be introduced to the buyer shortly before closing. Joint meetings—either virtual or in person—allow you to reassure clients and provide a smooth transition without creating uncertainty.
Have a Clear Post-Sale Communication Plan
Be prepared to explain to customers why you waited to disclose the sale. A response like, “I was bound by a confidentiality agreement and advised to wait until the appropriate time,” demonstrates professionalism and builds trust even after the fact.
Key Terms:
Confidentiality Agreement (NDA): A legal contract that prevents parties from disclosing sensitive deal information.
Transferable Economics: The portion of a business’s earnings and relationships that continue seamlessly after a sale.
Right of First Refusal (ROFR): A contractual right allowing certain customers or partners to match an offer before you sell to a third party.
Balancing transparency with discretion is essential when informing customers about a business sale. Consult your transaction advisors and legal team to ensure you meet contractual obligations while preserving relationships and protecting your company’s value.
