Headlines

• More than 40% of people would think that a private company was facing financial difficulty if they heard its leadership were thinking about selling the business.
  
• The results underline the severe and unavoidable reputational risks that come with selling a business.
• The results conclude that unless remedial action is taken, a loss of confidence in the business at such an important juncture could lead to a deterioration in the asset value of the business.
  

Press release

More than 40% of people would think that a private company was facing financial difficulty if they heard its leadership were thinking about selling the business, finds a new landmark survey. The result applies to companies even if they are financially healthy and have been put up for sale for other reasons, such as retirement, strategic disposal, or otherwise.

Based on a survey of 2,000 UK adults, the results underline the severe and unavoidable reputational risks that come with selling a business, whilst highlighting the widespread and damaging crisis of confidence that could be triggered by the announcement of a sales process.

The results come at a time when many entrepreneurs are actively considering selling their business off the back of the pandemic. Recent data from Lombard Odier showed that 63% of entrepreneurs now say they are actively considering selling their businesses or would consider doing so in the future.

The research puts the finding down to the resulting uncertainty that may be brought on by the news of a potential sale. In particular, the research says that the news would trigger uncertainty amongst employees, suppliers, and partners about why the business is being sold by its current owners — as well as how it might fare under new ownership.

It concludes that unless remedial action is taken, a loss of confidence in the business at such an important juncture could lead to a deterioration in the asset value of the business. The polling was conducted by Transmission Private, the leading communications agency to high-net-worth individuals, with data collected by polling agency OnePoll, a member of ESOMAR.

Jordan Greenaway, Managing Director of Transmission Private, said: “These results show that entrepreneurs cannot leave it to the last minute to announce the potential sale of their business. The risks are too great and if the news leaks early, it’s clear that the majority of people will assume the worst, potentially leading to a crisis of confidence in the business.

“The stakes are too high. If suppliers lose confidence, they may stop providing products and services. Employees may start looking around elsewhere. Financial partners may start putting pressure on the company to shore up cash reserves. And, ultimately, this could lead to a deterioration in the underlying asset value of the business.

“More entrepreneurs are considering selling their business at the moment, and we are advising more of them to get on to the front foot. Entrepreneurs need to take steps as early as possible to show that they have a clear, well-thought-out succession plan in place — and they need to communicate it clearly and transparently.”

Luke Thompson, a Partner at Transmission Private, added: "Speculation gathers in a void, and entrepreneurs need to take the time to answer the difficult questions that a potential sale will undoubtedly trigger about a business.

“As well as talking about succession, current owners need a credible answer to the question of why they are selling — and why they are selling now. They need to communicate that as early as possible to all key audiences — before stakeholders start to mistakenly assume the worst.

“The sale of a business is a stressful, exhausting, and emotionally draining time for an entrepreneur, but it is not possible to approach the sale of a business in a haphazard way, hoping that news of the potential sale doesn’t leak to employees, suppliers, or even the media. This wishful thinking could end up leading to a collapse in the value of the business.”