Dangers of selling up highlighted

10.02.09

Businesses should beware of ‘bogus buyers’, legal experts warn.

Commercially sensitive information such as price lists, customer lists and employee data may be at risk if businesses do not screen potential buyers, according to law firms.

Certain companies express an interest in buying business without any intention of purchasing. Apparently, it is becoming common practice for businesses to carry out due diligence on a competitor simply to obtain sensitive information.

Nick Taylor, partner at Higgs & Sons law firm, warns that companies that are eager to sell should resist the temptation to disclose sensitive information at an early stage.

He said: “Businesses should be very sure that their buyer is genuine before allowing access to sensitive information. Particularly in the current climate, the seller should be satisfied that the buyer has funding in place and that there is a genuine interest in the acquisition.”

Taylor advises sellers to protect their position in the build up to a sale by ensuring that no information is released before a buyer has signed a confidentiality agreement.

Sellers are also within their rights to question whether a buyer requires all information requested. It is a good idea to determine the level of detail needed also.

Taylor continued: “Sellers should be mindful of competitors using the lure of a transaction to 'fish' for information on the business.”

© Crimson Business Ltd, 2009