Ethics & the sale of a business

I need to be a little careful with the information provided - for reasons that should become obvious.

Say mini company X agrees to be purchased by big company Y

A purchase price is agreed between the two parties which represents relatively small money for Y but massive money for X

The owners of company X are aware that the income levels upon which the purchase price was based are unlikely to continue (i.e. significant reduction inevitable) and that the changes in expected income are unlikely to become apparent during the due diligence process

Is it ethically justifiable to continue with the sale without advising the purchaser of the changed circumstances?

Probably the reason company Y is buying is not just the income stream that Company x projects, but could well be that company y sees something that suits them.
(remember they didn,t get big by being stupid)

The circumstances have NOT yet changed ,buyer beware comes into play.

Plenty of people sold houses in fluffy times knowing in their heart this could not continue,
I do not think their call was unethical nor do I see this as unethical.

Dan Murray said:

Is it ethically justifiable to continue with the sale without advising the purchaser of the changed circumstances?

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This would be more a question on personal ethics than anything else. Any large firm making such a purchase are obliged to conduct a proper due diligence before progressing. They sift through information and ask pertinent questions. Unless the vendors are hiding/falsifying key information or lying there is no issue of concern.

There is an element of Caveat Emptor in any deal but if the owners are aware of a change in circumstance and deliberately conceal it from the purchasers or falsify figures ( for example, any future income forecasts they have supplied to the buyers do not factor in this change), then to me it is questionable ethically and possibly legally. However, you also say that the income level is unlikely to continue but you are not saying it won't. In which case, it's a risk that any competent due diligence process should discover. The fact that you suggest this is unlikely to be discovered suggests there may be some element of skull duggery here.