Maintaining Confidentiality Compliance

In my opinion, confidentiality is the number one concern for business owners. They are worried about, “Will my competitors know? Will my employees find out? Will my vendors hear about it?” That is the BIG thing, so Touchstone has a process that puts confidentiality at the top of our list of priorities for our clients. As the business owner, you have complete control over who you share your information at all times. 

The first level of confidentiality begins before the business owner even engages Touchstone. As part of our initial conversations with a prospective client, we sign a direct non-disclosure agreement (NDA) because the business owner needs to understand that all our conversations with them are covered under our NDA, so they can feel comfortable. We want to have a truthful, honest conversation and often that includes sending us financials and other sensitive information to review.

The next level of confidentiality comes when we first go to market with what is called a “blind profile” or “teaser.” This one-page document is sent out to our target list of buyers without identifiable company information on it, and we are very careful to not include a geographic territory that gives away which company we are talking about. We provide just enough information so that a buyer would be interested in learning more and at that point we have them sign a Confidentiality Agreement (CA). The CA states that they will not talk to other parties about what they learn from the information we share, and they agree not to talk to employees, customers, vendors or disclose anything about the process that we are going through to market your company. They also agree to destroy any information if they decide not to move forward.

To assist in maintaining control over your information, including the Confidential Information Memorandum (CIM) and other marketing materials, we use a data room that is hosted by Citrix ShareFile. This secure platform is encrypted and tracks the activity of parties with whom we provide access. We can see who logs in, when, and which files they have accessed. If they download any of the files, they are watermarked with the user’s information. It is exceptionally secure and designed for this purpose; so, any information that is shared, is not shared beyond where it was intended to go.

Confidentiality within our client’s company is just as important. A lot of business owners are concerned that their employees will find out before they are ready to tell them. What are the protections in our process so that employees are not going to find out?

We at Touchstone would never be in contact with your employees, nor would anyone that has signed a confidentiality agreement with us, without your express permission. This is a process that you maintain control of. It may be, for example, as an owner, you are comfortable telling your management team, or possibly just the CFO about a potential transaction, the choice is always the business owner’s.

Part of our process is working with you to determine how to gather information and prepare with or without the transparency – full or partial – of your employees. As far as the gathering of financial and other data we need, we will talk through that process with you. We will determine where the information is housed, and ways best way we can get access to that information in the least obvious way. Many times we are simply working through our client’s accounting firm and law firm to get what we need.  Nevertheless, at no point would we show up at your place of business and ask for information without your permission.

Even with all these procedures in place, we are quite often asked by business owners, “Isn’t a confidentiality agreement just a piece of paper? Are they really going to adhere to that?”  Our position is that it is a legally binding document so if they violate it, they could be sued. That is why many interested parties will have their legal counsel review the document before they sign. Furthermore, we make sure our client approves the target buyer lists, if you knows someone that operates in bad faith, then we will not include them. As a seller, you maintain control over who we talk to and what information we share with them, so you are involved in the process of maintaining confidentiality.

In the last 10 years at Touchstone, there has not been one time that I have personally experienced a potential buyer who signed the CA and violated it by going to customers or vendors. It has never happened to me and that should give some comfort to business owners. We recommend owners talk to their M&A attorney about this subject early in the process when so that they can get comfortable with the concept or legalities of confidentiality agreements.

It is also important to understand we are typically dealing with the CEO or other C-suite individual at the strategic buyer company for example, a high-level person who deals with confidential discussions with other companies, vendors, and competitors all the time, so they take this seriously. And with a financial buyer, private equity firms for example, they take confidentiality very seriously because they have a reputation to maintain.

In mergers and acquisitions, confidentiality is our number one priority. Touchstone Advisors has the experience and knowledge to protect their clients throughout the process of selling their businesses.