Confidentiality is a serious issue during an M&A process and you should be prepared for breaches early on. In my opinion, it’s unlikely that you’ll keep everything confidential before the final document is signed.
The first talks are not usually a big problem. Nobody will be suspicious if you talk about selling the company. If it doesn’t take up much time, people are unlikely to suspect anything. It’s different if the talks intensify, you’re not in the office much and you start asking employees unusual questions. If you have a founding team, you might be able to answer all the questions for the buyer without involving your employees. But often this is not the case.
Many buyers will start to push you into talking to your key employees. The sooner the better for them, usually. But not for you. You want to push this back to the latest possible stage of the process. You’ll probably have to compromise, though, and start involving at least some of your key players in the talks.
When you get hundreds of questions from the buyer about due diligence, you’ll most likely need your key employees to prepare the data. Even if you’re lucky enough to be able to prepare all the answers within the founding team, your employees will realise that something is going on. The whole founding team will be out of the office and focused on time-consuming due diligence.
Even if you don’t experience all of the above, it’s very likely that someone from your founding team will either tell somebody outside or accidentally expose confidential documents to employees, or even to the public.
I can only recommend that you prepare a clear statement for when the M&A process is revealed. At least for your employees and most important business partners.
The two most important points to include for your employees are:
- Show clearly the benefits to them and the company after the acquisition.
- Make it clear that the company still has a future if the sale doesn’t go ahead. (Until you have the final signature, there’s always a chance the buyer might walk away.)
The same points apply to your most important business partners. The tricky part here is that there could be a few very important partners who will be negatively affected by an acquisition. For them, there’s no positive story. I don’t think you should lie to them. Instead, downplay the whole thing and make the sale sound much less certain than it really is.
There is no golden rule for every case. But I highly recommend that you sit down early and draft the statements for your employees, business partners and other stakeholders who might be affected. Once the sale is leaked, you might have only minutes or hours to react. Leaving it that late might deliver poor results.