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Alex McCready: Reputation is a vital consideration for anyone buying or selling a business

In June’s edition of The Lede, we sat down with Alex McCready, Head of Reputation & Privacy at Vardags, to discuss why reputation is an important consideration when selling a business.

man being interviewed by reporters

This month’s comment comes from Alex McCready. Alex McCready is Head of Reputation & Privacy at Vardags, a top divorce and family law firm specialising in high-net-worth and complex cases. Alex helps prominent individuals, families and companies to defend and protect their reputation and privacy.

What are the challenges of selling a business?

Alex: The main challenge when selling a business is ensuring that all positive attributes and USPs are preserved and protected in preparation for, and during, the sale process. 

This can be an unexpected challenge, but is achievable with robust planning, together with the use of experts in risk and reputation management.

What are some of the reputational risks and where do they come from?

Alex: Reputation may be an intangible concept that is difficult to quantify, but it will be a vital consideration for anyone buying or selling a business. Not only will a business with a strong positive reputation be perceived as offering greater value, allowing them to charge more for their products or service, they will also attract a higher calibre employee, which in turn will benefit the business. 

Their customers are generally more loyal and are more likely to increase spending with that business. Since the market presumes that such businesses will deliver sustained earnings and future growth, they will also have higher price-earnings multiples and market values together with lower capital costs. As for risks, they include:

What needs to be considered before selling a business?

Alex: There are various factors that a business owner should be considering when preparing for a sale. In particular:

What about after selling a business?

Alex: If a sale involves the acquisition and absorption of your business into another, but you remain involved at C-Suite level, then there should be a digital and operational de-brief after the sale.

The use of cyber experts and ‘ethical hackers’ is recommended during this process to stress test your IT and digital security defences, as companies can be vulnerable to cyber-attacks immediately after a sale while transitional systems are in place and teething problems are being ironed out.

It is also important to ensure there is a good cultural ‘fit’ between the two businesses and to correct any misalignment in policies or approach. This is important as cultural clashes can be fodder for journalists who may prey on employees disillusioned or troubled by the change in ownership.

How can a business owner protect their privacy and personal reputation?

Alex: Digital audits should be performed both for the business as well as on key executives. It is regarded as good practice to periodically undertake such audits on the owner as part of a company’s risk processes.

Privacy audits on key executives allow the business to unearth content that may cause reputational embarrassment and will also identify any leaked private information about an executive or their family.

At the simplest level, this could involve changing privacy settings on social media accounts. It can also involve more complicated solutions such as removing private or confidential financial information that can be discovered online. In my experience, the final report is very eye-opening for the owner!

If media scrutiny is likely to be intense, or there is a risk of underhand tactics from third parties such as competitors, we often advise a full review of both the physical and cybersecurity of key executives to identify potential vulnerabilities.

Is personal reputation and business reputation linked?

Alex: This is absolutely the case — a business owner’s reputation is intrinsically linked to their business’ reputation, particularly where they are the founder or it is a family-owned and run business. For these type of businesses, it is a symbiotic relationship that cannot easily be separated. 

For example, the late Max Mosley faced a vote of no confidence in relation to heading Formula 1 and was banned from attending the following Grand Prix in Bahrain when the British tabloid press exposed intimate details of his personal life. The scandal was a contributory factor in him eventually standing down as head of Formula 1, an organisation that he had been involved in creating.

Why is personal reputation important to consider?

Alex: To put it simply, any reputational issues related to the CEO can easily impact a business and lower the share price or value of the company, which in turn could scupper a sale or result in a reduced bid. 

There are countless examples of how an executive’s behaviour can impact a business’ reputation. For example, when Elon Musk’s behaviour affected Tesla’s reputation or when Bill Gates placed a US$3 billion bid for the private jet company, Signature Aviation a month before publishing his new book, “How to Avoid Climate Change: The Solutions We Have and the Breakthroughs we need”.

Other businesses that have been affected by the words or actions of their CEO include BP in relation to the former CEO, Tony Hayward, whose comments on the 2010 Deepwater Horizon oil spill resulted in a sharp drop in share price. Another example was when Mark Zuckerberg’s poorly received response to the Cambridge Analytica scandal impacted how people viewed the company. 

About Alex McCready

Alex McCready is Head of Reputation & Privacy at Vardags. Alex helps prominent individuals, families and companies to defend and protect their reputation and privacy.

About The Lede

This article was originally published in The Lede, Transmission Private’s monthly newsletter that tracks the future of reputation management. Featuring interviews with leading private client advisers from the worlds of law, finance, and accountancy, sign up today to receive the newsletter in your inbox every month.

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.