How to Sell a Business Confidentially

A company sale is kept confidential by controlling who learns what, and when. Buyers first see an anonymous teaser, learn the company's name only after signing a non-disclosure agreement, and receive sensitive data such as client names and contracts in stages, as their interest becomes firm. Inside the company, only a few people are informed. When the buyer is a competitor, the most sensitive information is often shared only with a separate clean team, a safeguard that competition law may require depending on the data and the deal. Done well, employees, clients and competitors learn about the sale when it is signed, with a clear message about what changes for them.

Why confidentiality matters

A sale takes months, and during that time the company has to keep performing. News that the owner is selling can damage it in several ways at once:

• Employees worry about their jobs, and the best ones, who have most options, may leave.
• Clients postpone renewals or new orders until they know who the new owner will be.
• Suppliers may tighten payment terms.
• Competitors use the uncertainty to approach clients and staff.
• Banks may review credit lines, especially if loan agreements contain change-of-control clauses.

Every one of these effects can reduce results during exclusivity and give the buyer arguments to lower the price. And if the sale does not happen, the company has to live with the consequences. In the business communities of South-East Europe, where many owners, managers and bankers know each other, information travels especially fast.

Who learns what, and when

The principle is simple: each piece of information is released only when the buyer needs it to take the next step, and the most sensitive information comes last.

The anonymous teaser and code name

The process usually gets a code name, used in all documents, emails and file names, so that a forwarded message or a document left on a printer does not reveal the company.

The teaser has to be interesting enough to attract buyers and vague enough that they cannot identify the company. Common techniques:

• Describe the location by region or country group, not by city.
• Describe the activity one level more broadly than it is, if the niche is small.
• Give revenue and EBITDA in ranges or rounded figures.
• Leave out the founding year, the exact number of employees and named clients.
• Avoid photos of recognisable buildings, vehicles or products.

Before sending it out, test the teaser on someone who knows your market. If they can guess the company, so can a competitor.

A non-disclosure agreement that works

Every buyer signs a non-disclosure agreement before learning the company's name. A useful NDA in an M&A process covers:

• Definition of confidential information, including the fact that the company is for sale.
• Purpose limitation: the information may be used only to evaluate the acquisition.
• Who may see it: the buyer's employees and advisors who need it, bound by the same obligations.
• No contact: the buyer may not contact employees, clients or suppliers without the seller's consent.
• Non-solicitation: the buyer may not hire key employees or approach clients for an agreed period; 12 to 24 months is a common starting point for negotiation.
• Return or destruction of information if the buyer withdraws.
• Duration, commonly two to three years, depending on the deal.
• Governing law and jurisdiction, preferably in a country where the seller can enforce it. How far each clause is enforceable depends on that law.

An NDA deters misuse and gives grounds for a claim, but proving a breach and the resulting loss is difficult. The real protection is to share sensitive data only with serious buyers, only when necessary, and in a controlled way.

Controlling the data room

A virtual data room allows the seller to decide exactly who sees which document. Useful settings:

• Access rights by buyer and by folder, so that sensitive folders are opened only to the shortlist.
• View-only access without downloading or printing for the most sensitive documents.
• Dynamic watermarks with the viewer's name, which discourage screenshots and help identify the source of a leak.
• Activity reports showing who opened which document, which also reveal which buyers are serious.
• Questions and answers handled through the data room, not by email.

Personal data deserves attention too. Under the EU General Data Protection Regulation, employee records, salaries and client contact details should be shared only to the extent needed, and preferably anonymised or aggregated until the final stage.

When the buyer is a competitor

Competitors are often the buyers who can pay most, because they gain clients and capacity directly. They are also the buyers who could do most damage if the deal fails. EU competition law adds a further constraint: exchanging competitively sensitive information, such as current prices, margins by client, strategic plans or salary data, between competitors can be unlawful even in the context of a planned acquisition. The European Commission's horizontal guidelines, revised in June 2023, set out how information exchange between competitors is assessed and recognise clean teams as a safeguard.

The standard solution is a clean team: a small group of named people on the buyer's side, often external advisors and a few employees not involved in pricing or sales, who receive the sensitive data under a separate agreement. They report conclusions to the buyer's decision-makers in aggregated form, without passing on the underlying data.

Until closing, the buyer must also not take control of the target's business, a practice known as gun-jumping. In 2018, the European Commission fined Altice €124.5 million for exercising influence over PT Portugal before its acquisition had been approved, and the case then went through several years of appeals. Competition lawyers on both sides should agree the rules for information exchange and pre-closing conduct at the start of due diligence.

Banks, landlords and contracts with change-of-control clauses

Some third parties must be involved before closing even in a fully confidential process, because their consent is needed. Loan agreements, leasing contracts, office or warehouse leases, franchise agreements and some client contracts contain change-of-control clauses that allow the other party to terminate or renegotiate when the company changes owner.

Identify these clauses during preparation, so that there are no surprises in due diligence. Decide with the buyer when and how each party will be approached: usually after the letter of intent, sometimes only after signing, with closing conditional on their consent. Approach them personally, with a clear explanation of what the new ownership means for them. A bank that hears about the sale from the market rather than from the owner is less likely to cooperate.

In regulated sectors, such as transport, healthcare, financial services or energy, licences may also need to be transferred or the regulator notified. These steps are public or semi-public and should be timed close to signing.

Employees: who to tell and how

Most sales cannot be completed without some managers: they answer due diligence questions and present the business to buyers. Bring them in when their help is needed, not earlier, and consider:

• A separate confidentiality undertaking for each manager involved.
• A retention or transaction bonus, paid on closing, which aligns their interest with the sale and reduces the risk that they leave or talk.
• Clarity about their future: buyers often want key managers to stay, and the managers will want to know their role.
• A neutral, truthful explanation for visits and meetings, for example that management is meeting external advisors or investors, without disclosing the purpose. Inventing roles for visitors damages trust if the truth comes out.

Schedule site visits outside working hours where possible, and hold management meetings away from the company.

If the news leaks

Despite every precaution, rumours sometimes start. A prepared response limits the damage:

• Agree in advance who will answer questions from employees, clients and the press, and what they will say.
• Keep the message calm and true: for example, that the company regularly receives interest from investors, that nothing has been decided, and that operations and commitments continue as usual.
• Speak personally to key clients and key employees before they hear the rumour elsewhere.
• Check the data room logs and watermarks to find the source, and remind buyers of their NDA obligations.
• Speed up the process if possible: uncertainty does more damage than the news itself.

Announcing the sale

When the deal is signed or closed, the announcement should be planned as carefully as the process. Employees should hear it first, ideally from the owner and the buyer together, with clear answers about jobs, salaries and management. Key clients and suppliers should be called personally on the same day. A short written statement for everyone else, agreed with the buyer, prevents speculation.

Checklist

• Code name for the project, used everywhere.
• Anonymous teaser, tested on someone who knows the market.
• NDA with no-contact and non-solicitation clauses before the company's name is disclosed.
• Staged disclosure plan: what each buyer sees at each stage.
• Data room with permissions, watermarks and activity logs.
• Clean team arrangements if any buyer is a competitor.
• Confidentiality undertakings and retention bonuses for managers involved.
• Prepared response in case of a leak.
• Communication plan for employees, clients and suppliers on the day of signing.

Questions and answers

Sources

• Bird & Bird, Information exchange: the new EU regime for horizontal agreements, 2023
• Herbert Smith Freehills, Altice fined €124.5 million for gun-jumping conduct, 2018
• Cliffe Dekker Hofmeyr, Using a clean team to manage competitively sensitive information
• European Union, General Data Protection Regulation