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Industry Standards in Company Disclosure When Taking on a Business Partner
Are there any industry standards in company disclosure when taking on a business partner?We are a manufacturer and brand owner. We are looking at a single investor taking firstly 30% ownership, and then 60% ownership.At stake is company proprietary information including product formulations, batch manufacturing records, customer lists, access to social media postings etc. etc.Are there any industry acceptable guidelines as to the level of disclosure at say 30% ownership, and then 60% ownership? -
6 Replies
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I used to do M&A and private equity work. Generally, it is up to the investor to provide to you the information they require to make an investment decision. If it is a passive investor, they may focus primarily on financial information required to make their investment decision.
If they are eventually going to take a majority stake, then they will be looking for more detailed information on the technical side.
Let them tell you what they want disclosed is generally how it works.
Good luck.
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MarkBroussard said:OK, but what if they want everything at the 30% stage?I’m thinking that the stage disclosure process and limits should be stipulated as part of a legal agreement. -
What about a non-compete clause or what if they sell their 30% to another party a few years from now, a few things to consider, partnerships are unpredictable.
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Dazed said:What about a non-compete clause or what if they sell their 30% to another party a few years from now, a few things to consider, partnerships are unpredictable.
Yes indeed….. and when the partner has its own brand, it would be easy to grab all the IP and transfer before the deal is completed.
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For the most part, I don’t think IP is not particularly valuable in the cosmetics industry.
I don’t know if they still do but, P&G used to let any company license the shampoo technology they used in making Pantene. They knew what many people figure out…the formula is only one small piece of whether a product will be successful or not.
Sure, you need to make a good formula but consumers are not particularly good at noticing differences. With the right packaging, brand name, positioning, and fragrance you can make people like even a sub par formula.
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mikethair said:MarkBroussard said:OK, but what if they want everything at the 30% stage?I’m thinking that the stage disclosure process and limits should be stipulated as part of a legal agreement.
Mike, you can stage their due diligence. Start first with the financial and marketing information. If that passes their test, then proceed on to formula technical information.
You should negotiate a right of first refusal in the event the want to sell their 30% stake and/or you have the right to approve the potential buyer so you dont’ wind up somewhere down the road with a partner that you never intended to be a partner.
Your attorney and/or investment banker should be able to guide you through this process.
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