When a business is larger than a one-man shop, what the employees know about the sale of the business and when they know it are of major consideration and concern.
Keeping the employees in the dark is extremely important.
Breaches of confidentiality about a business and it’s for-sale status can cause massive issues.
There is a reasonable concern that once an entire staff knows the business is for sale, it will be impossible to keep that for-sale status confidential for any future time the business is on the market.
Employees may also jump ship. This usually occurs within the lower-level employees – think servers in a restaurant or clerks in a retail shop. The typical fear is a new owner will come in and clean house or that the business is for sale because it is closing the doors for good (rarely true).
What many sellers and their employees fail to realize is the jobs of critical staff (and maybe even the staff as a whole) are probably never safer than during the time frame when new ownership takes over. New owners need trained staff in place to keep the business up and running while they learn their new responsibilities.
My employees found out, now what? I don’t want to lose my whole staff.
If you are a seller whose employees somehow know the business is on the market (either intentionally or by confidentiality breach), make sure your employees know that you are expressing the importance of those employees to a new owner – this can greatly help to calm fears.
For the buyer of a business, meeting the staff before deciding whether or not to buy the business may seem necessary, but there are usually very few instances where this will be able to happen. Lower-level staff will likely have to be met after the deal is closed.
The employees a buyer will most likely be able to meet pre-closing will be key employees like managers and other staff members who are crucial to the operation and would be very difficult to replace. In most situations, the buyer will meet these employees only after all other aspects of due diligence have been satisfied and the deal is still moving forward. This protects the seller’s business from any damage that could be done by revealing the sale to the staff too soon.
The message here is that maintaining the confidentiality of the business sale will be paramount to the successful sale of the business, so both buyers and sellers will have to work together when it comes to the staff in order to keep everyone in place.
Are you a business seller who is concerned about your staff knowing the business is for sale? Are you a business buyer who feels they need to meet the staff before you get to the closing table? Please feel free to leave us a question or comment, and we will be happy to address any concerns you may have.
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