Recently, there was a post on Kijiji and Facebook by a restaurant owner who wanted to sell her business. Word spread and customers thought the business had closed and was selling its equipment. So they stopped coming. The vendor had to get back on social media to explain they were still operating - but the damage had been done. The news of her closing spread rapidly. The advertising effort to reverse that message would have cost more than she could afford. Sales dropped until the owner had to shut the doors and get salvage prices for used restaurant equipment.
In another case, the seller of a business would not tell his wife that the business was for sale until the deal had closed and the money was in the bank. He was so concerned that she might start making plans for the money, before they had the money. He felt that would be problematic if the deal fell through for some reason. (The deal did go through, and he kept to his plan and did not tell his wife until the money was safely in his accounts – it made for a funny scene when we ran into them in a restaurant one day, but that’s a story for another day).
As counter intuitive as it seems, keeping the sale of your privately held business anonymous, low key, and invisible is imperative. Business owners looking to sell often see similarities with selling their homes, and those certainly exist. But there are some important differences, and the approach to promoting the sale and finding prospective buyers is one of the biggest of those.
If you are selling your house, you likely want as many people as you can possibly reach to know. The hope is that you will generate broad interest, multiple offers, and receive the best possible price. Objective: Create lots of buzz.
In selling your business, you want the same outcomes, right down to multiple expressions of interest, but the path to getting there is and should be very different. There are no MLS or ads in newspapers and online sites. There are no open houses (at least ideally not). And there certainly should not be a for sale sign on the lawn in front of your business. The Objective: Create lots of buzz before anyone knows who you are.
That paradox can be managed with careful planning and structured processes.
Why protect your anonymity?
It can take a lot longer to sell a business than a house. If your senior managers, customers, suppliers and bankers hear that the business is for sale, unnecessary risks may arise. Will senior people, concerned about the uncertainty of their own future roles, start looking for other jobs? Will customer loyalty be shaken; if a customer was considering a change, rumours of a sale can create a good opportunity to switch suppliers. And if your competitors find out, what rumours might they spread to your customers and others? New customers might avoid you because they may be concerned about starting a supply relationship if the business is about to be sold, and they don't know who they'll be dealing with.
How do we create buzz without people knowing?
Anonymously.
@Catchfire… starts with a teaser that highlights the sector, size, and key characteristics of the company, which is circulated through a variety of proprietary channels. The selling company is not named and any characteristics that could make it identifiable are removed. If prospects indicate interest, we vet and pre-qualify them through our own research and direct conversations; we assess their capacity to execute a deal, their management capabilities and track record, and their degree of interest. Once we make a recommendation to our client to proceed, our client will approve or veto anyone on the list, for any or no reason. Once approved, prospects execute a nondisclosure agreement which allows the opening of the conversation and for more information to be shared. Initially, and until an LOI is in place, the information is revealed gradually. This is particularly important when the prospective buyer is a competitor; those situations are managed somewhat differently.
Before sensitive information or competitive secrets are shared, we schedule a face-to-face meeting - or meetings - between seller and prospective buyer, along with site visits. Each party will have to establish a level of trust and comfort with the other before the full data room is opened. Site visits often take place after hours, or under the guise of 'prospective customer' or something similar, to explain who those people are and to not arouse suspicion amongst employees.
Only after those steps are successfully completed will the data room be opened, allowing for a more fulsome analysis and the development of Expressions of Interest. Even at that point staff and customers are identified by numbers only, not names, at least until there's a LOI in place, at which point full due diligence begins and the buyer will have access to all the information they require to make a go-no go decision.
We are so focused on anonymity that we do not even announce the deals after they are completed. That decision - whether to go public or not - is left entirely to the buyer and seller. Some make a big announcement, and others want to ensure its 'business as usual' and don't ever make a splash about it.
As a seller, your objective is to generate broad interest and multiple expressions of interest, while protecting the anonymity of your company.
If managed properly it works effectively while protecting the company’s (and your) best interests. When there's a deal, there's a deal, and at that time the appropriate people will know. But until then it is all speculative.
The owner who would not tell his wife may have taken it a step further than most, but he certainly had the right idea!