Video 17 – Should You Tell Your Customers You Are Selling Your Business?

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Rob Godard:

Look, if your business is for sale, Mike, are you going to tell your customers?

Mike Whittle:

No, I don’t think so. Not yet. I think there’s always a timing debate here. During the preparation stage we’ll do quite a lot of exploring with the data that sits behind the company. Key client information would come up both in terms of the density of reliance you have on them and the type of contracts you have with them. And within those contracts there could be a change of ownership clause where you may have to disclose to those particular clients that you’re selling your business. And they have the rights to renegotiate their contracts as a result. But that’s something that that very much happens towards the end of the transaction. For us, we would recommend that you do the research, prepare your understanding of the landscape and be ready to have those conversations at the most appropriate time. But that’s at the end of the process during due diligence or right as the transaction about is complete.

Rob Godard:

You’re right, you’re right, Mike, because, Steve you’ve had quite a few on the trot now where some of the clients have been contacted with the seller’s permission as part of the due diligence.

Steve Barry:

Yeah, and the commercial BD, I’ve had a series of them as you say, where there’s been a need for that to take place. And that’s been important both in terms of the potential investor requires satisfying themselves as to the validity of the proposition that they’re buying into, and also where there’s been quite substantial change of control clauses that have needed to be exercised prior to completion. And again, as long as that’s handled appropriately within the terms of NDA, then I don’t have any evidence that’s caused any problems for my clients.

Steve Barry:

My gentle counsel normally to have a client that might be nervous about that in terms of a conversation would be if there is going to be a conversation in your concern, we would quite often suggest that they’re talking about investment for the next stage of their strategic growth. That then sets a context as to why those questions might be asked. You’re reassuring the potential client customer in terms of what they’re setting a context for the investment that might follow and not having to directly tell a blatant untruth to that particular client or customer that you then have to explain at a later time.

Rob Godard:

A really good way of positioning.

Steve Barry:

Yeah, it is. Yeah.

Rob Godard:

Yeah.

Steve Barry:

Works well.

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