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4 reasons for a business sale confidentiality agreement

On Behalf of | Sep 21, 2021 | Contracts

Even if you are generally an open person, it may not be in your interest to allow the details of the sale of your business to become public. A business sale confidentiality agreement is a contract that you enter into with prospective buyers requiring that they keep whatever information they gain as part of the negotiations to themselves.

Chron.com describes a few good reasons for you to have a business sale confidentiality agreement.

1. Protection of intellectual property and proprietary information

Buyers understandably want to know as much as possible about the company before buying. However, if you share sensitive information with them before the sale, they could use that information against you later. A business sale confidentiality agreement ensures that potential buyers cannot use the information they gain from you in a detrimental way. It gives you legal recourse if they do not live up to the agreement.

2. Retention of top talent

Rumors of a change in management make employees nervous and restless. They may fear for their jobs and start seeking employment elsewhere. This can hinder your sale as you depend on your talent to earn profit. A business sale confidentiality agreement helps prevent word of the sale from leaking out.

3. Preservation of consumer confidence

Employees are not the only ones who get anxious over news of a business sale. Customers may worry whether the company will continue. This can hurt your profits as they may begin to pre-emptively take their business elsewhere.

4. Secrecy after the sale

A business sale confidentiality agreement can continue to protect you after the sale. It can include a clause preventing the buyer from publicizing the sale price if, for whatever reason, you do not want this information to become public.

There are other ways that you can maintain confidentiality regarding the sale of your business. For example, you can arrange to meet with prospective buyers somewhere off-site.

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