Competitors and Confidentiality

By Dennis McCarthy – (213) 222-8260 – dennis@mbsecurities.com –

Welcome to the M&A Series. M&A for middle market companies considering a sale.

In this video, I’ll address an issue that scares most companies about M&A, that is, what if competitors find out I’m selling my company and use the information against my company?

My first answer is that your competitors are already using that and everything else they can think of against your company.

Your customers have heard it all before and take it with a grain of salt.  Customers know the information comes from a competitor.

Second, before you disclose anything to a competitor, make sure you get them to sign a non-disclosure agreement, known as an NDA.   An NDA is not ironclad protection but it creates a legal contract between you and your competitor.

An NDA doesn’t specify what you will share with the competitor or any other party but it does limit what the other party can do with your information.

Also, when sharing information with a competitor, you might decide to parcel out the information in a way that limits the information released until you know the competitor is going to honor the NDA and, equally important, propose an attractive offer.  If the competitor does neither, cut off the information flow and demand a return of what’s already been released.

One of my colleagues likened the release of information to a competitor to peeling an onion, with the first layers just surface data and succeeding layers getting more to the core.  You may never get beyond the surface layer with a competitor.

As I said in my post, “Who’ll Pay the Most”, a competitor may be the best buyer or may not.  It’s likely worth including competitors into the sale process to determine their proposed pricing.

The key is to manage the information flow to competitors in a prudent manner.

Please contact me to help your company to complete an M&A transaction or any capital market project.

PeelOnion

 
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