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Exiting a company is about much more than just numbers and contracts. It's about the people in your company, from the frontline employees and executives who created the company's value, to the leadership team that closes the deal on the best terms. Your people were the heart of your company, but their involvement in the exit process needs to be considered and cautious – and requires trust and discretion. This is how you support them throughout the transaction.
Before the sale – say nothing
When should the owner notify employees about the sale of their business? Not until the sale is complete and the buyer has officially taken possession. That's rule number one: Until the transaction is complete, only the owner, their transition team, and possibly a key team member should know about it.
Premature disclosure of this information can have several adverse consequences:
- Early departure: News of an impending sale can cause fear and uncertainty. Employees often assume the company is for sale because it is failing, or they fear the new owner may fire them. They may quit before the sale is complete, damaging the company's value.
- Legal challenges: The seller must certify to the buyer that the staff is in good standing. Leaving early could appear to be a misrepresentation and the buyer could sue, try to rescind the contract or otherwise jeopardize it.
- Delayed transition: A strong, stable team can be a significant value driver. Buyers often include contingencies in the transaction to ensure key employees stay. If there isn't a strong team, the owner may need to stay temporarily to ease the transition.
- Demanding compensation: Employees who learn of the sale know the value they have in the deal. They may demand bonuses or raises as an incentive to stay. Granting such bonuses can impact profitability and sale value, not to mention the uncomfortable feeling that the business is being held hostage.
Without proper precautions, keeping your plan secret is easier said than done.
Related topics: 7 important preparations for selling a business
Maintaining confidentiality
Your company may have such a well-maintained rumor mill that you sometimes feel like you're the last to hear your personal news. Most confidentiality breaches occur when owners try to handle everything themselves without professional guidance. Keep your list of insiders small by hiring a team of experienced consultants who can maintain discretion and protect sensitive information about company operations, customers and employees.
Sometimes you need to tell a key employee about the sale early in the process – a top salesperson, the CEO or someone else. Do this as the final step of due diligence and make sure to follow strict confidentiality agreements.
What happens if, despite your efforts, someone finds out? Your response depends on what stage of the sales process you are in. If it's early, you can say you're exploring partnerships or considering offers without actively marketing the company. “Anything is for sale when the right offer comes along” is true, but vague enough to put an end to rumors. If these strategies don't work, you may need to be transparent and insist that they sign a non-disclosure agreement.
Announcement of sale
Once the sale is complete, communication should be strategic and focus on the positive. If you handled the sale proactively, you should have no trouble presenting it as good news – because it will be good news:
You're finally retiring and have found the right person to carry on your legacy. Other changes in your life are taking you in new directions, and the new owner understands the team and mission. The business is so successful that it has attracted an owner who can take it to the next level.
First, inform the management team. Provide talking points that will help teams navigate the transition. Then hold a full team meeting that includes both the seller and the buyer. Celebrate the event, thank your employees—they are the ones whose work attracted the perfect buyer—and highlight the opportunities the new owner brings. For smaller companies, one-on-one meetings with each employee can be used to discuss personal concerns and questions.
One of the first questions will be whether the new owner will lay off employees or make other significant changes. This shouldn't be a problem unless you're a large company or corporation. Contrary to popular belief, small and medium-sized business sales rarely involve layoffs. Buyers typically want to retain employees because they are critical to the company's success. The goal is to maintain a stable and strong team after the sale.
Related topics: I specialize in exit planning – These are the 5 steps you need to take before selling your business
Training and transition
The seller typically trains the buyer on business operations. This transition period can last up to a year, depending on the complexity of the deal. Employees may see this as an opportunity to prove their value to the new owners.
New owners should avoid major changes in the first six months. Stability helps employees adjust to the new owner without added stress. Small, positive changes, such as new benefits, can help build trust.
An open-door policy is essential, at least during the transition period. It allows employees to voice their concerns and feel heard. This builds trust and can prevent minor problems from escalating into major ones.
Believe in your team
In small to mid-sized companies, people are one of the most important drivers of value, and this is true in a sale as well. Building a solid team and proving its value through appropriate documentation and reporting can significantly increase the value of your company. Carefully planning and managing the transition will ensure a smoother process and preserve the integrity and performance of the company.
Careful preparation, strategic communication and professional advice are the key to successfully supporting employees when they leave a company.
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