Are there best practices for telling your employees you are selling?

August 08, 2022

by a searcher from Rice University - Jesse H. Jones Graduate School of Business in Houston, TX, USA

A friend of mine has been approached by a PE company that wants to buy her company. Her employees are vital to the continued success of the company and she is concerned that they might leave when they find out about the change of management.

Would it be better to tell them ahead of time that she is thinking about selling? Give them an opportunity to put in their own bid? Wait to inform them after the transaction is complete?

Each method has its own pros and cons and I would be interested in hearing from someone who has successfully navigated this transition and any advice you might have..

Thanks!

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Reply by an intermediary
from Wake Forest University in Winston-Salem, NC, USA

Agree with ^redacted‌, ^redacted‌ and ^redacted‌. This is one of those "it depends on the size" and frequency vs. severity considerations (i.e., it doesn't go sideways often but when it does, it's a doozy). A large company with a professional management team (i.e., that has a c-suite) and that has been few a few mergers before is one thing; an owner-operator situation with a couple dozen employees or so is quite another. Often telling those beyond the absolute need-to-know just opens the buyer and the seller up to unneeded risk, the staff to unneeded worry, and the company and transaction up to potentially very damaging leaks of the transaction that can lead to loss of employees, supplier issues, and competitors going after customers. Once the wire has cleared is a good time to let folks that aren't required to get the transaction to closing know. And as Ahmed put it, tell them when you can dedicate time to explaining it, answering questions, and alleviating concerns. To that end, recommend against announcing on a Friday, and particularly on a Friday afternoon. You want to be around your folks so they can come to you with concerns and don't have time to stew on an issue over a weekend.

Reply by a searcher
from Harvard University in Omaha, NE, USA

Here is what I did when I did a majority recap with a PE firm a few months ago:

My conversation approach:
1. What's happening
2. Why it's happening
3. How it ties into our strategy
4. What it means for my staff and their day-to-day
5. What's happening to me (I was staying on)

Rollout approach:
1. I read in my Executive Team a couple of weeks after my I-Bank began marketing. I followed the conversation approach above and I game-planned with them how we would conduct Management Presentations.

2. When we were deep in due diligence and close was certain, I had an all-hands and informed the rest of my company. Again, I followed the approach above. Everyone responded positively to it.

I think what helped was the following:
1. I was honest, genuine, and direct in my announcements
2. We've done acquisitions on the buy side, and many of our employees come from acquired companies, so they had all felt the positivity of those events.
3. My team knows the pillars of our strategy and our North Star, so this event nested well within those. I talk about strategy and culture often with people here.
4. A few months in, it's going as I said it would for everyone here and their day-to-day, which reinforces trust and acceptance of the change.

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