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Strategies for Maintaining Confidentiality

When it comes to selling your business, time can play tricks on you. It’s your ally before your business hits the market, but it can become your adversary once it’s up for sale.

The longer your business remains on the market, the greater the risk of a leak.

Why is that a concern?

Once news of the sale gets out prematurely, the narrative can spiral out of control and become impossible to manage. Employees who catch wind of the sale through unofficial channels may grow skeptical. Customers might start looking elsewhere, and competitors may attempt to poach your staff and clientele.

But doesn’t a non-disclosure agreement (NDA) ensure confidentiality?

While a signed NDA is a crucial component, it alone doesn’t guarantee confidentiality, although it does prevent leaks in most cases. However, the more time it takes to finalize a deal, the higher the chances of a breach.

The true purpose of a confidentiality agreement is to prevent leaks, but it shouldn’t be your sole reliance. A well-crafted confidentiality agreement should be complemented with additional measures to maintain confidentiality.

In this article, we unveil a range of strategies you can implement both before and during the sales process to safeguard the secrecy of your business sale.

Reasons for Maintaining Confidentiality

Confidentiality is paramount for three key reasons:

  • Employees: When employees catch wind of a potential sale, it can trigger anxiety about job security. Some may start job-hunting elsewhere, while others might even consider forming a competitive group in response to feeling betrayed.
  • Customers: Both current and potential customers might get wind of the impending sale and worry that a new owner could drastically alter the business model or raise prices. This concern may lead them to explore alternatives with competitors.
  • Competitors: Armed with knowledge of the sale, competitors may seize the opportunity to lure away the company’s employees and customers.

Let’s delve into strategies to effectively maintain confidentiality.

Strategies to Implement Before the Sale

PREPARE for the Sale in Advance

The timeline of selling your business plays a crucial role in maintaining confidentiality. The longer the process takes, the greater the chances of a leak. To safeguard your business’s confidentiality, proactive preparation is key. Ideally, you should begin preparations years in advance. This approach not only facilitates a smoother and faster transaction but also significantly reduces the risk of leaks and their potential repercussions. Remember, an ounce of prevention is worth a pound of cure, and this principle holds true for selling your business.

Control the NARRATIVE

Just like the childhood game of “telephone” where messages quickly transform as they’re passed along, rumors can swiftly mutate, and once they go viral, controlling the narrative becomes nearly impossible. Rumors, once spread, are like a bell you can’t unring.

However, when you proactively manage and control the disclosure process, you gain the upper hand. This approach allows you to:

  • Minimize Potential Damage: By controlling the flow of information, you reduce the risk of harm.
  • Maintain Trust: Being the first to share your plans with key stakeholders helps retain their trust.
  • Craft a Compelling Narrative: Shaping the story in a cohesive and compelling manner aligns your interests with those of your employees.

Once news of the sale leaks, the narrative can spiral out of control. Employees who learn indirectly often become distrustful, and rebuilding their trust can be a lengthy process. Unfortunately, time isn’t a luxury when you’re in the midst of selling your business. Losing the trust of your team puts you at a significant disadvantage during the sale, as it hinders your ability to leverage your employees as an asset in building trust with the buyer. A lack of trust between owners and employees makes buyers nervous and can derail deals.


Employees recognize that every entrepreneur reaches a point in their journey where it’s time to pass the reins. A change in ownership often aligns with key milestones in a business’s lifecycle, creating new prospects for motivated employees. For many, personal career growth is closely tied to the company’s growth. However, as some businesses mature, owners may focus on maintaining rather than expanding, limiting employee advancement and enthusiasm. This situation can be disheartening for ambitious team members. New ownership can inject fresh opportunities that weren’t feasible under the previous regime.

Naturally, employees who have been coasting may feel uneasy about potential changes. Some buyers have reported discovering instances where employees appeared to contribute minimally yet received full compensation. A transition can serve as an effective way to shed any organizational “dead weight.” It’s important to note that the majority of employees are dedicated and diligent, but, like any group, there may be exceptions.

In the case of a larger buyer, new ownership can open doors for employees, providing pathways for growth beyond the current organization. For instance, if a powerhouse like 3M acquires a $20 million company, ambitious employees might consider the array of opportunities within 3M’s diverse divisions. Moreover, new ownership often injects capital to fuel business expansion, creating fresh avenues for standout employees. In nearly all acquisitions, buyers aim for significant post-closing growth and are prepared to take calculated risks to achieve it. This dynamic presents your top talent with promising prospects—ensuring they grasp the potential ahead.

Draft a Non-Disclosure Agreement (NDA)

A signed non-disclosure agreement alone does not guarantee confidentiality, but it plays a crucial role. NDAs effectively prevent breaches of confidentiality in most instances. However, the longer the time it takes to finalize a transaction, the greater the likelihood of a leak occurring. In many cases, such leaks are unintentional, with the responsible party inadvertently disclosing sensitive information to others.

While the primary aim of a confidentiality agreement is to prevent breaches, it’s essential to complement it with additional measures to safeguard confidentiality. For instance, when sharing highly sensitive information with competitors, it’s prudent to consider a separate agreement or a multi-part NDA tailored to address the disclosure of such specific information.

Strategies to Employ During the Sale

Control WHAT and WHEN Information Is Released

Effectively managing the release of information is a cornerstone of maintaining confidentiality during a business sale. Here are several robust strategies for controlling both the content and timing of information shared with potential buyers:

  • Redact or Aggregate Information: When dealing with highly sensitive data, consider sharing it in summarized form, with critical details like customer or employee names redacted.
  • Release Information in Phases: Gradually provide information to buyers as the sale progresses and specific transaction milestones are met, such as completing financial due diligence. At each stage, ensure that the buyer formally acknowledges the completion of that phase. For instance, disclosing key customer or employee names should only occur towards the end of due diligence or after finalizing a definitive agreement.
  • Tailored Strategies for Different Information Categories: For exceptionally sensitive information that could be vulnerable to misuse by the buyer, consider options like summarization, sharing with neutral third parties, or providing only limited information to the buyer. Exercise extreme caution, especially with unprotected trade secrets and non-registered intellectual property.
  • Utilize an Electronic Deal Room: When negotiating and conducting due diligence with multiple parties concurrently, employing an electronic data room can be prudent. Such platforms track information access and grant you control, such as limiting buyers’ abilities to download or print data.
  • Document via Email: To establish a clear paper trail, communicate as much information as possible through email. This documented history can offer substantial leverage in case of potential litigation. Having comprehensive documentation can tip the scales in your favor when evaluating the merits of a legal action, as sellers typically carry the evidentiary burden in confidentiality agreements.

Control WHO Information is Released To

When handling highly sensitive information, it’s crucial to have stringent control over who gains access to it. Here are several effective strategies for achieving just that:

  • Screen Buyers: Conduct thorough financial screenings for all potential buyers. Give extra scrutiny to direct competitors. Remember that due diligence is a mutual process. Before sharing sensitive data, verify the financial standing of your buyer during due diligence. Inquire about their acquisition history and request conversations with CEOs of their past acquisitions. If any red flags emerge, take a step back and delve deeper. In cases involving private individuals with purported wealth, consider requesting a credit report or hiring a private investigator for background checks if suspicions arise. Although such instances are rare, trust your instincts and investigate further when doubts surface.
  • Involve Neutral Third Parties: For highly sensitive information, consider appointing third-party entities to assess the data and compile a summary report for presentation to the buyer. In a significant transaction, where we represented the seller, two customers represented 40% of the annual revenue. The buyer had concerns due to the revenue concentration, but the seller hesitated to let the buyer directly engage with the customers. We engaged a third-party firm to conduct customer surveys and produce a concise report for the buyer’s review.
  • Limit Information to Specific Parties: Alternatively, restrict information to designated individuals or departments within the buyer’s organization, like their CPA, attorney, or CFO. In such cases, it’s advisable for the third party to also sign a non-disclosure agreement, although modifications to the agreement terms may be necessary.

“Buyer acknowledges that select evaluation materials will be shared exclusively with Buyer’s external advisors and commits not to disclose such information to employees within its marketing, research and development, technology, or finance departments.”

  • Leverage Attorney-Client Privilege: Exclude documents subject to attorney-client privilege from the data room, especially those relevant to ongoing litigation. Essentially, if you are amidst legal proceedings, reveal any documents related to the case solely through your attorney. Note that in the event of a successful transaction, the buyer may share a common interest with you if they become a “successor defendant.” However, this privilege is not guaranteed, particularly if the transaction falls through. Hence, it’s a prudent move to confide litigation-sensitive details exclusively through your attorney to maintain attorney-client privilege.

Handle BREACHES Immediately

Confidentiality breaches seldom result in lasting harm. More often than not, such breaches stem from inadvertent disclosures, and swift remedial action can usually resolve any potential issues.

Should a breach occur, it is advisable to promptly contact the party responsible. Assess their response and demeanor—listen to their side of the story before considering drastic measures. In many instances, the other party will express regret and take immediate corrective steps, such as terminating the employee involved or addressing the situation with the affected customer to clarify the narrative.

When the nature of the breach is unclear, a phone call can serve to raise awareness of the issue to the other party, and typically, the matter will swiftly dissipate. Following the conversation, it is prudent to send a concise email summarizing the discussion and any agreed-upon actions. This documentation establishes a record in case litigation becomes necessary in the future.


Preserving confidentiality is a fundamental aspect of the business sale process. While a confidentiality agreement is essential, it should complement the strategies outlined above to guarantee the continued protection of sensitive information during the sale.

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