Monday, October 30, 2017

The Critical Importance of Confidentiality in the Sale or Purchase of a Business


Confidentiality of any sale or purchase deal of a business is of paramount importance due to a variety of reasons.

o   Threats arising from competing businesses

There is a very real danger that if the business’s key secrets are compromised the sale might not go
Confidentiality in the Sale or Purchase of a Florida Business
through. This may be due to a myriad different reasons such as the fact that competing businesses in an extremely cut throat market may find out that your business is up for sale and use that information to sell similar businesses or assets at a lower price so as to be in a position to undercut you and snare your most lucrative buyers to their own cause.

o   Uncertainty amongst your customer base

Then there is the threat that the core customers that you supply to, may find out that your whole business (or even part of it thereof) is up for grabs and therefore there are doubts regarding your overall solvency and stability and in future you might not be able to satisfy their demands. This way, they may well end up cancelling their current orders with your business and the end result would be that the potential buyers may see your business more as a white elephant and incapable of generating profits. This way they would either take back their decision to take over our operations or alternately give an offer markedly less than the one they may have been contemplating earlier.

o   Employees may want to jump ship

Add to that the fact that there is a very real probability that your employees may get wind of your prospective sale and may be fearful about their own respective futures and therefore commence looking for other jobs so as to be able to jump ship rather than be dependent on the questionable plans of their future employers who may take up shortly after words or as soon as the sale goes through.

o   Suppliers and their lines of credit

Once your suppliers get wind of the fact that you are now in the process of winding up your business and divesting the same to someone else, with whom they may have to forge an entirely new business relationship, the odds are that they may become fearful of their existing balance of payments and may demand faster payment turnaround time periods amongst tighter overall timelines. They may also limit access to credit, thereby creating massive cash flow problems for you long before your deal has been finalized.
This would have a markedly adverse effect on your overall business by lowering profitability and by default, downgrading the value of your business as well.

o   Landlords and their fears

 If your business has been established in a rented premises the original owners or landlords may not appreciate the fact that you are selling and may not get along all that well with the prospective buyers, leading to a potential breakdown in communications of an otherwise potentially lucrative deal. Landlords may become nervous about a sale and may refuse to cooperate with prospective buyers.
In the light of the above, we can safely deduce that confidentially is of crucial importance when it comes to the sale or purchase of a business entity.

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