Finding the Leak: Breach of Confidentiality in Business Sale

We sold a steel fabrication plant in the central California valley and although we had a purchase agreement in place and ready, we were waiting on funding. We recommended the seller not disclose the sale to his employees yet, especially since the buyer had some issues with funding.

The first crisis was when a bank manager, also a friend of the family, asked his 10 year old daughter in front of her young friends, "why is your dad selling his business?" Unbelievable. We seemed to get by that crisis, but soon two employees approached the owner, asking if he were selling. The word seemed to be out, so we came up with a plan on how to announce that discussions were taking place. We didn't announce that a sale had taken place because it hadn't, we still had to secure funding and there was always a possibility it wouldn't happen. I've had some owners fib their way out of questions, but I don't recommend lying. Its kind of a trust thing with employees. Dodge the question, tell a joke ("hey, you know me, I'm always for sale for the right price"), but don't lie.

The owner was angry and asked who we had told, indicating he thought perhaps we were to blame. I thought it was probably the bank manager and the young friends, because this sort of breach doesn't happen very often. But a few days later he sheepishly admited that he had told a few "trusted" employees, then a few more, "about five" in total. Apparently one of them, and quite possibly all five, couldn't keep a secret.

The deal did close, and the final sale was announced at a BBQ lunch with both seller and buyer present.