A business is for sale, and this business has employees. The employees have been kept in the dark about the for-sale status in order to protect the integrity of the business throughout the transaction process, but now that a buyer and seller have come to an initial agreement and the sale is moving forward – how do you handle the employees?

This is one of the most important (and by nature carefully handled) aspects of the sale of a business. The sale of any business that has employees (especially a business with critical “key employees”) will need to be handled delicately.

As a buyer, do you demand that you meet with employees before closing as you feel they are critical to the business? As a seller, do you let this happen? What if the buyer walks away or approaches the employees the wrong way?

Although a seller might feel that their employees will only be loyal to their ownership and won’t accept a new boss, in most cases employees can view a new owner as a positive – if the transition is handled properly. 

How? Focus your discussions with employees on the benefits a new owner will bring – and wait to tell them until after the sale.

Here’s a few thoughts:

Long term businesses often become stale as sales efforts and marketing may have lagged or become non-existent leaving the business just gliding. A new owner can bring that new energy, marketing ideas, additional employees, new clients and just a new way of doing things which can invigorate a business and push it to the next level. As the business grows and changes for the better those employees who stay can reap the benefits of those changes. This is especially true if the business is being acquired by a larger firm or if the business is ripe for expansion.

One of the reasons why you don’t tell employees too early is most of the time the employees really do want or need to keep their job. Telling employees too soon can make them feel very insecure and can leave them wondering if they will have a job after the sale closes. They might worry that they will be replaced, they might have concerns about getting along with a new owner or they may worry that they won’t be able to handle the changes a new owner will make. These worries can cause an employee to panic and quit – which is bad news for both sides of the deal. This is why both sides should wait until after the sale to tell the employees. Knowing that they’ve made it past the end of the transaction will assure an employee that their job is safe. Buyers should let their new staff know that no major changes are planned and immediately set expectations. 

The message here is typically the loyalty of employees is to the business or their job and not necessarily to the seller. It’s also critically important to wait until after the sale to tell employees anything.

Instead (after the sale), both sides should focus on open and honest communication, ask for input about what the business can do better, be clear on new roles and reinforce that the new owner is counting on the existing staff. Hopefully that will build confidence and loyalty on both sides, thereby creating a positive environment as the business moves forward to the future. 

Have you sold a business and told your employees too early about the sale? Are you buying a business and want to know more about why it’s a bad idea to talk to the key employees before closing? Please feel free to share your story or ask questions here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com