What is staged disclosure when selling a business?

Staged disclosure is a way of running a sale, not a legal term from a statute. The seller decides in advance what a buyer learns at each point, and releases more as the buyer commits more. The aim is to keep the sale confidential while still giving serious buyers what they need. BDC’s description of the sale process gives a ready-made set of stages to work from.

Stage one: first contact

BDC says intermediaries have access to a broad network of qualified buyers whom they can discreetly approach on the seller’s behalf. It also warns that, depending on a listing site’s confidentiality procedures, word could get out to employees, customers or suppliers that you are selling. So decide what a first-contact summary will leave out, and ask any intermediary or site how it controls who sees what.

Stage two: confidentiality agreement and letter of intent

BDC says it is customary for a buyer to sign a confidentiality agreement and write a letter of intent to pursue discussions. BDC describes the letter of intent as a non-binding offer setting out the proposed price, key terms and an exclusivity period for due diligence, though it can bind the parties on confidentiality and exclusivity where it says so. You may decide this is the point to share more detail, such as the business’s name and summary financials. Read the letter of intent explained first.

Stage three: due diligence

After an LOI is accepted, BDC says the buyer and its advisors examine the seller’s finance, legal, operational and HR functions. Decide in advance which contracts, leases and records you will release at this stage. BDC says that if the seller has been transparent through the earlier stages, there should be little difference between the ask and the offer. Consider holding the most sensitive items, such as customer lists, until this stage, and ask your lawyer how to share them safely.