Why Buyers and Sellers Must Be Confidential Agents
In our column in the October issues of Printing Impressions and packagePRINTING, my New Directions Partner colleague Albert J. Reijmer and I will tackle the subject of preserving confidentiality in activities related to mergers and acquisitions. We’ll discuss several critical M&A phases where mum’s the good word from the viewpoints of both buyers and sellers.
Keeping things to yourself in an M&A transaction may seem the most natural and commonsense behavior in the world—a rule that literally goes without saying. But, no matter how seriously we take confidentiality, it’s a rule that’s prone to being broken in the stress and distraction of transferring ownership of one company to another. When this happens, the consequences can be messy.
I’m thinking of an owner who wasn’t as careful as he should have been in restricting the number of employees given advance knowledge of his intention to sell the company. It turned out that one of them, a top-producing sales rep, personally disliked the prospective buyer and was letting his unhappiness be known. Without the sales rep and his book of business coming along in the deal, the buyer would no longer be interested. What could have been a post-sale issue for the new owner to resolve was now an emergency that threatened to scuttle the seller’s plans.
Buyers can be loose-lipped, too. I recall one who signed a binding confidentiality agreement with the seller—par for the course in M&As—and then went out and violated it by discussing the deal with outsiders. This deal was saved only by virtue of some pretty strenuous apologizing and pleading on the talkative buyer’s part.
An extreme example of the opposite kind was the deal in which the buyer, for various reasons, could not come to town for 10 days after closing to announce the purchase to the employees of the company he’d just acquired. Nevertheless, the company ran just fine, with only the former owner and two key employees aware that it was actually operating under new ownership. As you can see, there are times in M&As when silence, like action, speaks louder and more reliably than words.