Exploring A Sale Without Employees or Clients Finding Out

Secrecy Protocols & Plausible Explanations

Author

Howard Givner
March 07, 2025

Welcome to Event Business Intelligence, your weekly source for deep dive insights on growth, strategy, measurement, innovation and M&A for owners of event businesses and executives responsible for event P&Ls.

In today’s newsletter:

  • The Greater Employee Risk is Productivity Loss

  • Creating A Cone of Silence

  • What To Say If People Find Out

  • The Risk of Competitors Exploiting the News

  • The Value of A Savvy Intermediary to Screen Buyers

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When small or medium sized business owners are considering a sale, one of the top concerns they share is how to avoid their employees or clients finding out about it. They fear that if word gets out that the company is for sale, employees may jump ship, and clients will get spooked. I know that’s how I felt when selling my companies over the years.

And while these are legitimate concerns, the reality is that even if they did find out, it usually has far less of an adverse impact than they think.

Risk of Disruption In Focus & Productivity

What’s more likely is that employees will become distracted and less productive, worrying how the sale will affect them personally. Clients will usually call you if they hear rumors, and can be easily reassured by a confident CEO explaining the reasons for the sale (see below) and ensuring them that nothing will impact the stellar service they’ve been receiving.

Still, the last thing you need while negotiating with prospective buyers is a staff taking their eyes off the ball. 👉 It’s absolutely critical that your business continues to pump on all cylinders, and that you hit - or exceed - the numbers in your forecast. Not doing so can scare off buyers, or at the very least, cause them to question your projections and other claims you’ve made in your CIM (Confidential Information Memorandum, the document used to showcase your company).

Creating A Cone of Silence

Whether you’re fully committed to selling your company, or are just exploring opportunities and looking to get a market valuation for your business, it goes without saying that you want to keep the circle of trust small. It should be limited to your senior leadership team, and anyone else who you’ll rely on to supply financials, sales data, and other operational information needed to build out the CIM. This small group should understand the rationale behind the process (again, see below), and have some type of incentive should the sale go through.

If these people have signed employment agreements with non-disclosure clauses, this is a good time to remind them of the confidential nature of this process.

As goofy as it may sound, it’s also common to create a code name for the project, though one could argue that an exotic sounding one, e.g. “The Mercury Project”, is just as likely to arouse suspicion as if you didn’t have one.

If People Find Out

But what happens if, despite your best efforts at secrecy, word gets out to your staff or clients. What do you say?

The first step is putting yourself in their shoes. They’re scared. They’re afraid their jobs will be eliminated, or significantly changed in some way. And it’s understandable. They joined your company, not that of some other random buyer yet to be identified, with an unknown culture. Uncertainty, and lack of being in control of their livelihood, are powerful causes of anxiety.

Given that perspective, they’ll be in need reassurance. Here are some talking points to consider:

  • You’re exploring ways to fund growth. The same information you’re pulling together for potential buyers would be needed if you’re negotiating a merger, acquisition, or strategic partnership. A good CIM will outline various ways that a buyer can scale the business, whether it’s being able to offer additional services, expanding to new verticals, upgrading your tech stack, investing in marketing, etc. Hopefully you’ve already shared these growth ideas to your team in the course of running your business, but if not this is a good time to reframe their perspective. Say that you’re exploring a variety of options to fund this growth. It’s important to turn their anxiety into excitement about the future.

  • You’re doing a periodic business valuation. As my colleague Reed Phillips articulates in his book QuickValue: Discover Your Value and Empower Your Business In Three Easy Steps, it’s a good business practice to perform a valuation of your business every year as a way to measure how well the company is growing its value. Such valuations are often used to help secure loans or lines of credit.

  • You’re looking to bring in outside investment. Everything you go through to prepare your company for sale would also be needed for securing outside investment, which could be utilized to shore up the company’s finances, fund growth, or both. You’re acknowledging that you are selling part of the company, not necessarily the whole thing, which may be the case anyway; if you’re selling to a private equity owner, they’ll want you to maintain an ownership stake in the business.

  • Businesses are built to sell. Companies don’t live forever. It’s a natural stage in the lifecycle of a business to be sold to a buyer, or passed on to the next generation of owners. In fact, the marketability of your company is a sign that you’ve built a sustainable enterprise, one worth selling.

  • You’re not going anywhere. In most instances, buyers will insist that the owners stay on for a period of time, which can be a couple of years, to ensure a smooth transition of clients and operations. If the sale includes an earn out, the seller will be incentivized to grow the business during this period as well. Hearing that you’re not cashing out and riding off into the sunset will be very reassuring to employees.

The Risk of Competitors Exploiting the News

While most owner focus on what would happen if their clients or employees got wind of your pending sale, an often overlooked risk is that of their competitors finding out, and using that leverage to plant seeds of doubt among industry prospects. Because in many instances, the potential strategic buyers contacted are, in fact, competitors.

Serious buyers are unlikely to be the source of the leak, as they don’t want word to get out either. They’re just as likely to be concerned that their own employees hear the news and get skittish about consolidation cuts. And the more people that find out, the greater the risk that new buyers come to the table and bid up the price.

A more likely source is one of the ‘tire-kickers’, who express interest in your business in order to get a look under the hood, but who aren’t serious, or don’t have the finances lined up. It’s not right, but it does happen. Yes, they’ll have signed an NDA before being told the name of your company and getting access to the CIM, but the NDA usually allows them to disclose your information to key personnel needed to evaluate the business for a potential offer (e.g. executive leadership team, accountant, lawyer, banker, etc.) It’s often those ancillary players who have the loose lips.

The Value of A Savvy Intermediary to Screen Potential Buyers

This is where hiring an investment banker, broker or other adviser comes in. In addition to professionally managing the process of bringing your business to market and negotiating with buyers, having a third party advisor also helps keep things under wraps. They screen inquiries and only divulge the name of your company to qualified, vetted buyers.

Further, hiring an intermediary with deep knowledge of the industry and its key players helps ensure the process will be locked down. They’re regularly in touch with the decision-makers at companies and know their appetite for acquisitions at any given time, as well as the profile of the firms they’re looking to acquire. This deep knowledge and relationships enables them identify and screen out non-serious buyers.

For additional reading, check out my colleague Ken Sonenclar’s report Selling Your Event Business: A Guide for Founders, Owners & Senior Executives.

Conclusion

While event business owners are often concerned, and rightfully so, about the risk of their employees or clients finding out that they’re exploring a sale of their company, the reality is that by taking the steps outlined above you can significantly minimize that risk. In addition, having a clear narrative ready in the off chance someone does find out will feel reassuring. Should word still get out, the likelier impact is not immediate employee turnover, but a disruption of focus and loss of productivity.

Here’s to taking your event business to the next level!

Howard Givner
Senior Advisor | Oaklins: DeSilva & Phillips (M&A) email me
CEO | Heathcote Advisory Group (Consulting) email me

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