If you go to any business broker or M&A firm to sell your business, the first thing they’ll probably do is prepare an Information Memorandum (IM) that details why an acquirer should buy your business. Fast forward a few weeks or months, and many business owners realize this was a big mistake.

Why? Because publicising your intention to sell makes your business vulnerable to perceptions of instability among staff, competitors, clients, and suppliers. Small to medium-sized companies are delicately balanced, and the last thing an owner needs is staff hearing rumours that the business is for sale.

Distributing an IM, even with a Confidentiality Agreement (CA), means losing control over who sees your information. Competitors might learn you’re for sale, leading to sensitive situations as suppliers and customers catch wind of the news. Even when an IM omits the vendor’s name, knowledgeable competitors can often figure out who the business is.

Moreover, IMs quickly become outdated, turning this approach into an expensive and dangerous waste of time. We’ve seen cases where sensitive information from an IM was leaked to major clients, leading to crisis meetings and demands for explanations.

Does a CA protect your sensitive business information? Not always. Even well-written agreements can be undermined when employees or advisors of a potential acquirer aren’t mindful of the CA’s provisions. While some large acquirers take their obligations seriously, many disregard the agreement once they lose interest in the acquisition, destabilizing the vendor’s business.

So, why do brokers and M&A firms insist on distributing sensitive information to minimally qualified prospects? They believe detailed information is needed before a potential buyer can decide, but this approach is flawed.

The real challenge is reaching the widest possible market of genuine synergistic acquirers without compromising the integrity of the asset you’re trying to exit. Owners and their advisors must thoroughly research and qualify targets before disclosing the vendor’s identity. Only when a buyer is active and has specific criteria reflected in the vendors business should you consider revealing more.

Information should be earned, not given away cheaply. Disclosure should match the buyer’s criteria with the vendor’s business. We rarely write IMs because strategic acquirers often understand the market well and don’t need a glossy brochure. Our research shows most IMs are hardly ever read, and strategic acquirers often don’t get past the executive summary.

Instead, ask simple questions to gauge a high-level match, and only release the minimum information needed at each stage. Different buyers need different information at different stages, so why give everyone everything at once? In the early stages of our campaigns, we focus on anonymity, not just confidentiality. We protect our clients’ identities and only reveal them with a full justification and a client-approved plan.

So, if you’re considering writing an IM to sell your business, or if an advisor recommends this approach, it’s time to rethink your exit strategy. Read more about our unique process for selling your business here or contact us to discuss how we operate differently.

Get in touch if you’d like to to discuss your exit strategy.