< return to news articles

The Importance of Upfront Disclosures

When we engage a client to sell a business or property, we go through an interview process, review financial information, and use disclosure forms to find out as much as we can about the business.

Many times in that process we have people tell us things that they think are not important but that we know are really important to deal with before we start talking to prospective buyers and showing the business.  

We have learned from experience that there are an awful lot of ways a deal can be killed during due diligence when undisclosed problems, even minor ones, are discovered.  At that point there has been a lot of effort spent by our client, the buyer, and us that can end up being wasted.

The key is to minimize surprises.

It is really important to disclose things like customer or competitor lawsuits, partner or family ownership disagreements, minority share ownership, pending developments nearby, and anything else that may be perceived to be negative. It is best to do this right up front.

When dealt with early in the process things like that can be resolved, or a prospective buyer can decide whether or not to proceed, and if they do they will not be surprised later on when they get into the details of the issue.
If a buyer has made a commitment to purchase and is in due diligence reviewing details and comes across similar issues at that point, issues that could have been minor early in the process become a major threat to the trust that is required to get through a deal. 

More important than the details of the issue is the fact that it was not disclosed, which leads to the question, “what else are they hiding?” This can end up in the termination of the purchase agreement… a disaster for all interested parties.


< return to news articles