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Retaining confidentiality during the entirety of the M&A process is a fundamental concern of a business seller. In order to maintain confidence, many business owners wait until it is completely necessary to break the news of a sale to their employees. Making this announcement too quickly could create a rift in an employee’s relationship with the company that results in a premature exit. Those in the know are also liable to let the news of an M&A deal slip, and this could impair the entire process. However, notifying key staff members will prepare them for future changes, and they may be able to assist the business owner in M&A affairs. Due to the confidential nature of an M&A deal, many business owners and M&A experts are torn over the appropriate timeline of telling employees about a sale.
Oftentimes, when the news of a business sale is revealed, people jump to negative conclusions about the state of the affairs. This can damage the reputation of the business, therefore lowering its worth. Productivity can also decline once employees are aware of a potential sale, and they may begin to lose faith in the company or start searching for alternative employment. These factors are why many business owners choose not to inform their employees of a sale until the ink is dry. If, for some reason, the deal falls through, the seller and employees can continue on with business as usual and avoid any harbored negative feelings that employees may have. A large group of sellers choose to hold off informing their staff until the deal is complete.
Many other business owners select to only inform key staff members before the M&A deal closes, as to aid them in adjusting to new ownership as well as supply them with a sense of trust. These select few staff members are typically employees that the buyer intends to keep as part of the new managerial team, who also have the ability to assist the seller throughout the M&A deal process.
If a business owner does choose to divulge information to employees before the deal closes, it is important to outline the future plans for their position. If the new owner plans to make cutbacks, the seller should emphasize the importance of job performance to retaining their current position.
Many feel that the shock of such a large reveal is unfair to employees. Sellers choosing not to inform employees until the deal is done must be careful to avoid creating a sense of betrayal. Many will be concerned that their job will change or be eradicated. Employees may also experience difficulty adjusting to a new owner, especially when their livelihood feels threatened. What these employees often overlook is that this new sale or merger could improve their jobs and the prosperity of the company. Therefore, it is key for sellers to highlight the positives outcomes of the merger or acquisition.
One effective way to ease the stress on employees is for the seller to remain on staff until the integration is completed. Many employees may fear that the new owner will not be favorable or will alter company policies. While it is ultimately up to the buyer to handle this culture integration, the seller can assist by becoming available during the transition.
Nervous employees may also be put at ease by the seller providing them with a letter of encouragement that outlines the positive changes that will be made in the business as well as mentions their job security. The timing of this letter can be left up to the discretion of the seller.
Whenever the seller decides to inform employees of a sale, it is imperative that the seller explain the motives behind the decision to sell and illustrate the positive outcomes for the future. Many ultimately choose to do what they feel is right for their specific situation. Proper communication is key no matter when the seller chooses to release the information.
If you would like further advice on when to tell your employees that an M&A deal is underway, please contact George & Company in complete confidence. We are a premier group of M&A intermediaries that would be happy to assist you.