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The exit process is about greater than numbers and contracts; it’s about the people in your organization, from the front-line and executive staff who create value to the leadership team who close the deal on the best terms. Your people are the heart of your organization, but their involvement in the exit process have to be thoughtful and sensitive—requiring trust and discretion. Here’s how you may support them throughout the transaction.
Before the sale – don’t say anything
When should an owner tell employees that the business is being sold? Not until the sale is complete and the buyer officially takes possession. This is rule number one: Only the owner, their transition team, and perhaps one key team member should know until the transaction is complete.
Premature disclosure of this information can have several negative effects:
- Early exit: Hearing about an impending sale can create fear and uncertainty. Employees often assume the company is for sale because it is going bankrupt, or they fear they might be laid off by the latest owner. They may leave before the sale is complete, damaging the value of the company.
- Legal challenges:The seller must confirm to the buyer that the staff is in good standing. Early departures can make it appear to be a fraud, and the buyer may sue, try to back out, or otherwise undermine the transaction.
- Delayed transition: A robust, stable team may be a significant driver of value. Buyers often include conditions in the transaction to be certain that key employees stay. If there is no strong team, the owner may have to stay on temporarily to ease the transition.
- Claim for damages:Knowing their value in the deal, employees who learn of the sale may demand bonuses or raises as an incentive to stay. Giving them can affect profitability and the value of the sale, not to mention the discomfort of feeling like the deal is being held hostage.
Without proper precautions, keeping the plan a secret may prove tougher than expected.
Confidential
Your business may have such a strong word of mouth that you simply sometimes feel such as you’re the last person to hear your personal news. Most breaches of confidentiality occur when owners try to handle all the things themselves without skilled guidance. Keep your insider list low by recruiting a team of experienced advisors who can ensure discretion and protect confidential information about your small business, clients, and employees.
Sometimes you might need to transient a key worker about the sale early in the process—the lead salesperson, the CEO, or another person. Do this as a final step in your due diligence, and make sure it’s handled with strict confidentiality agreements.
What if someone finds out despite your efforts? Your answer depends on how far along you are in the sales process. If it’s early, you may say you’re exploring partnerships or considering offers without actively searching for a company. “Everything’s for sale if the right offer comes along” is true, but vague enough to shut down rumors. If these strategies don’t work, you might need to be transparent and insist on a nondisclosure agreement.
We are announcing a sale
When it’s throughout, your communications needs to be strategic and focused on the positive. If you’ve proactively addressed the sale, you must have no problem presenting it nearly as good news – because it’s going to be excellent news:
You’re finally retiring and have found the right person to carry on your legacy. Other life changes are taking you in latest directions, and the latest owner understands the team and the mission. The business is so successful that it has attracted an owner who can take it to the next level.
Start by briefing your management team. Provide talking points to help teams through the transition. Then, hold a team-wide meeting with each the seller and buyer. Celebrate the event, express gratitude to your employees—they attracted the ideal buyer—and highlight the opportunities that latest ownership presents. For smaller corporations, individual meetings with each worker can address personal concerns and questions.
One of the first questions might be whether the latest owner will let employees go or make other significant changes. This shouldn’t be a problem unless you’re a large company or corporation. Contrary to popular belief, employees are rarely laid off in the sale of small and medium-sized businesses. Buyers typically want to retain employees because they are integral to the success of the business. The goal is to maintain a stable and strong team after the sale.
Training and transition
The seller typically trains the buyer in business operations. This transition period can last up to a yr, depending on the complexity of the business. Employees may see this as an opportunity to display their value to the latest owners.
New owners should avoid making significant changes for the first six months. Stability helps employees adjust to the latest owner without added stress. Small, positive changes, equivalent to latest advantages, may also help build trust.
At least during the transition period, an open-door policy is essential. It allows employees to express concerns and feel heard, which builds trust and can prevent minor issues from escalating into major problems.
Believe in your team
People are one of the most vital value drivers in small and medium-sized organizations, and this is no different in sales. Building a solid team and demonstrating their value through proper documentation and reporting can significantly increase the value of your organization. Careful planning and management of the transition ensures a smoother process and preserves the integrity and efficiency of the company.
The key to effectively supporting employees in exiting their business is thoughtful preparation, strategic communication and skilled advice.