During World War II, “Loose lips sink ships!” was a popular slogan. In other words, any information about the country’s defense could harm our troops if the wrong people got a hold of it.

It’s not so different when you’re selling your business. There are four very important things you could lose if someone on your team has loose lips. Here’s what a breach of confidentiality could do to your sale.

1. You could lose control

As a business owner, you want to control the information that is released about you and your company. You must be able to trust your investment bank to control when and how that information gets out.  Your investment bankers should explain how information is protected, what information will be released, when it will be done, and who will receive it.

You should not have to worry about information leaks or maintaining confidentiality. Your top priority should be staying focused on the business during the sale.

Even after the sale is completed you and the new owner should decide which information will be released to the media. There are definite benefits to announcing the sale and promoting the new organization. As before, you need to control exactly what information is released and when. Effective confidentiality management provides control and prevents unfounded information from impacting the sale.

2. You could lose customers

When you’re trying to sell your business, you want to remain focused on growing the business and exceeding customer expectations. If customers discover you are selling the business, they may be less willing to do business with you, because they can’t predict what will happen next or how it will impact them.  Your competitors are fully aware of this, and can be expected to use any information about a possible sale to help lure customers away from you.

Potential new customers who learn about the pending sale may decide to buy from yor competitors instead, especially if your business requires long-term contracts. No one wants to be trapped in a contract that may have to be fulfilled by new owners.

In most situations, the sale of a business will have little, if any, impact on customers. In fact, the new, larger company may provide services or products you cannot provide. As the prior owner, you probably won’t be leaving the business overnight. You want to keep your customers happy, and so do the new owners. A breach of confidentiality breeds unjustified customer paranoia and can be avoided simply by ensuring confidentiality is maintained at all levels during the sale.

3. You could lose high-value employees

You have built a successful company by building a strong team. They know the business, your customers, your plans, your strengths and weaknesses. They are vital to maintaining the growth and value of your company. They are critical to the sale as well.

If key employees find out about the pending sale through a breach of confidentiality, they may worry about losing their jobs and look for other employment. Losing key employees at this time can have a severe impact upon the sale, and even upon the value of the company.

When planning to sell, some owners choose to inform only key employees. This is often a wise decision, because these employees will be extremely important during the due diligence process, and they help to ensure company growth during and after the sale.

However, every employee that is informed about the pending sale is a confidentiality risk. Work with your investment bank to sign confidentiality agreements with key employees, and develop a plan that will assure them their jobs are not at risk.  

4. You could lose company value

A serious breach of confidentiality, such as leaking what the owner “thinks” the company is worth, or more detailed information about a bid proposal, can have dire impacts upon the transaction process and even lower your company’s valuation.  

Everyone involved in the selling process -- the owner, investment bankers, lawyers, accounting firms, key employees and others -- must maintain strict confidentiality to ensure the process is managed ethically and that all parties are treated fairly.

In the end, confidentiality is all about ethics.  You and the professionals you hire to sell your company are entrusted with information that can have a serious impact upon the company, and even the lives of those associated with it. Yes, loose lips sink ships. But they can also sink your sale.