Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

The secret is protected beneath layers of security in a non-descript bank vault deep in the suburbs of Atlanta.

Legend has it only two living people know the formula, which is so precious they are not allowed to travel on the same plane. Coca-Cola will go to any length to protect its recipe.

Likewise, finding out how Colonel Harland Sanders mixed those eleven herbs and spices to make his world-famous coating for deep-fried chicken would require discovering the undisclosed location of a bank vault somewhere in Louisville, Ky.

Story continues below advertisement

Most businesses have confidential information, processes and formulas they would not want competitors to see. When you decide to put your company up for sale, you risk giving strangers — potentially even your competitors — the keys to your vault.

In my experience, there are three basic stages at which you'll need to reveal an increasingly deeper level of information when selling your business:

Level 1: Teaser document

Once you decide to put your company up for sale, your adviser will work with you to create a short description of your business, which disguises your company's identity but provides enough information to pique a potential acquirer's interest. Your "teaser," in M&A parlance, will typically include:

• A basic description of your business (what you sell, to whom).

• A profile of your customers (how many, how often they buy).

• Your basic financials (revenue, EBITDA, historical and projected growth rates).

Story continues below advertisement

• An overview of the market opportunity (size of the market, opportunity for growth).

Based on the limited information you reveal in a disguised teaser, your risk of giving away something you'll regret is limited.

Will unfaithful employees drown in your moat? Make sure they need to invest significant time or money to build what you created so they realize there's more to your business than marking up their time, writes John Warrillow

Level 2: The book or online data room

Of all the companies and individuals that receive the teaser document, some will, you hope, request a more detailed description of your business. Your adviser will likely ask the acquirer to sign a non-disclosure agreement in return for access to more information, which is presented in either "the book" or an online data room.

This is when things get tricky.

Story continues below advertisement

In addition to revealing the name of your company, you'll want to provide the potential buyer with enough information about your operations to get him or her excited about making an offer. This info often includes details on your future plans, sales processes and even your new product development ideas.

You'll often get your best offer from someone close to your business — a competitor, supplier or another company that is adjacent to your business.

Outsiders will now start to understand your special approach and what makes your business unique. They are not under an obligation to make an offer, yet they have access to competitive information. Some companies even make a habit of claiming interest in buying other companies in their industry just so they can get a look at their competitors' confidential plans.

There are some things you can do at this stage to minimize your exposure:

• Don't give away the secret recipe. The book (or online data room) needs to include historical financials, future projected financial performance, details on your customers, contracts, leases, and so on. It does not have to provide your deepest secrets for making your product or winning customers. If there is something truly proprietary in the way you make what you sell, leave it out.

• Request that an online data room be created, instead of providing a printed book or a PowerPoint or PDF file that can be easily forwarded. An online data room is simply a password-protected website to which the potential acquirer needs to log on to view files. An online data room provides a greater level of security, visibility and negotiating leverage for you because you can see who has accessed what files and how deep some buyers have gone to understand your business. This provides clues about who is really serious about making an offer and can help you spot individuals who may just be on an information-gathering expedition.

Story continues below advertisement

Twelve reasons to sell before you 'retire' Sometimes it seems the only socially acceptable way to exit a privately held business is to hang on until you're well past your prime, writes John Warrillow

Level 3: Diligence

Once potential acquirers have reviewed the detailed information in the book or online data room, you will possibly get some offers. Most likely, each offer will be contingent on you agreeing to stop negotiating with other parties and to provide the bidder with a two- or three-month period of due diligence.

In the diligence phase, the buyer's representatives will likely come to your business and demand an even greater level of detail. They may want to talk to some customers and see your contracts with them, and they will want to inspect your physical plant or office and watch how things get done. They'll want to talk to your salespeople and understand your formula for winning new business. You'll need to provide full disclosure at this point, which opens you up to the greatest risk if the deal does not go through.

The best way to protect yourself is to perform your own due diligence on the buyer before you agree to his or her offer and the accompanying scrutiny. Here's what to check out:

• Does the buyer have a history of making acquisitions? If the company has made three acquisitions in the past year, you can safely assume it is actively pursuing acquisitions as part of a growth strategy and it is a serious buyer. If it has not made an acquisition in the past few years, that should raise a red flag.

Story continues below advertisement

• Does the company have a history of walking away from deals? Ask your M&A adviser about its reputation as an acquirer. The best M&A folks will be well connected and can tap their network for an off-the-record assessment of the reputation of the buyer. If a company has made offers that it then walked away from after diligence, don't be surprised if it walks away without closing your deal.

• Does the company have a history of making last-minute changes to its offer? Some buyers have a strategy of introducing new deal terms or a lower price a few days before a deal is scheduled to close. They know the seller has invested a lot of money and emotional energy into the sale process and may be reluctant to walk away, making it easier to get concessions the seller would not have agreed to earlier in the process. Try to speak with other owners who have sold to the company making the offer. Ask directly if the deal was changed during the diligence period and what last-minute surprises they were faced with.

Selling a business requires you to expose yourself in a way that will not feel natural. Protect yourself by revealing what's appropriate given the stage you're at.

Special to The Globe and Mail

John Warrillow is the author of Built To Sell : Turn Your Business Into One You Can Sell. Throughout his career as an entrepreneur, Mr. Warrillow has started and exited four companies. Most recently he transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which he sold to The Corporate Executive Board in 2008. He is the author of Drilling for Gold and in 2008 was recognized by BtoB Magazine's "Who's Who" list as one of America's most influential business-to-business marketers.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies