Prospective Buyers: Releasing Information During a Business Sale

How Much Information Should You Share with Prospective Buyers When Selling Your San Diego Business?

Serious prospective buyers will conduct their own detailed investigation of your business. You should also do some of your own research into your prospect’s company. During this process, your business broker will receive many requests from prospective buyers asking for information regarding your business. Enlist the help of your San Diego wealth management firm in fielding these requests and sending accurate and appropriate information to the prospective buyer. You are likely to receive requests for client data, financials, and payroll and benefits analyses. Prospective buyers are also likely to ask for business projections for the current year and the following two years, as well as balance sheets and financial statements from the last three years. This is where your San Diego business lawyer can prepare an NDA or non-output in order to keep your secrets secure.

Your San Diego business lawyer can help you prepare all of these documents in advance so you can respond to prospective buyers promptly. If you feel overwhelmed or worry you may fall behind in meeting the prospect’s requests, consider hiring temporary help for this part of your business sale; it will be money well spent.

Protecting Your Secrets: Releasing Information To Competitors While Selling Your Business

As you shop your business around to potential buyers, you may encounter competitors who wish to acquire your enterprise. Talk to your wealth manager about appealing to competitors with legitimate interest, so you can avoid those who merely wish to glean information, especially competitors.

Once you encounter a serious buyer who is also a competitor, you should still use caution regarding which information you disclose. Talk to your San Diego business lawyer before releasing your proprietary processes and other sensitive information. A competitor with legitimate interest in purchasing your business will understand your concern and desire to control the timing with which you release information. Just make sure you explain that you are looking forward to sharing detailed records when the time is right. Your business lawyer can help you protect your secrets by selecting a time to disclose sensitive records that is beneficial to both you and the buyer, and when you have the appropriate contracts signed.

 Creating an Employee Agreement

As a responsible business owner, it is essential that you work with your San Diego business lawyer to draw up an employee agreement. Employee agreements ensure that the people who are most important to your business will not abandon the project after the sale, leaving the buyer with an enterprise that has suddenly decreased in value, and is in need of unexpected reorganization.

Your employee agreement should be signed by all essential personnel, such as management. Your business lawyer will make sure the document describes staff responsibilities, and includes details for compensation and termination protocol.

Your employee agreement should also include a non-compete clause, which protects your business and its future owner by prohibiting employees from leaving your company to immediately begin work for a competitor. Most non-compete clauses contain explicit details regarding restrictions, and provide incentives for employee cooperation. The non-compete clause is usually binding for twelve to eighteen months. The assistance of your San Diego business attorney is essential in creating an employee agreement tailored to your unique enterprise.

Making prospective buyers aware of your employee agreement provides them the confidence they need to place high bids. The agreement will also provide your employees a sense of security after your business sale.

Have a question? Please call us at (619) 793-4827 to speak with a San Diego Business Lawyer