Retaining Top Talent When Selling Your Business
As a business owner or key executive, one of the most critical times for your leadership is when your business is for sale. Your primary focus is securing a sale that provides the best value for the business. You and many of your team have worked hard to build an organization and now the time has come to set the stage for a transaction. What should be your primary focus? Building a strong track record of EBITDA? Closely reviewing the financials and developing explanations for anomalies? Cleaning and organizing the facility? Securing all of the materials that will be required for the due diligence process?
These are all important, but there is one item that needs to be addressed to maximize transaction value and to ensure all of the other items can be performed. You need to have a plan to ensure key members of your staff are retained during the sales process.
Some of you may be asking: Why do I need a plan to retain my staff? First and foremost, the sale of the business is not a confidential process. You will be asking questions and securing materials that will tip off key executives and employees. Closed door meetings will not go unnoticed. Key staff will become uncomfortable during these times. These employees are also in high demand and can easily leave the organization. The next major item to remember is that, in most cases, the company that is buying your business is also buying the key staff and loss of key staff can impact the sale and, at a minimum, the price of the sale.
Who do you need to ensure you retain? There are essentially four groups your staff will fall into during a sale. The first group is the President and or General Manager. The second is the Marketing and Sales Leadership and staff. The third is key members of your technical staff. The final group is other key employees.
Let’s discuss each group. The President and General Manager are key because these individual(s) typically possess solid knowledge of the industry and business, and possess strong industry connections. The new owners usually want to retain this knowledge and leadership because losing them weakens the acquired company and transitioning someone into this role from the buyer’s other operations will weaken them elsewhere. Not retaining these employees will typically lower the transaction price.
Sales and Marketing expertise at the leadership and the staff level is essential. The new owners will be required to grow the company to improve profitability and pay down the debt as quickly as possible. Strong sales and marketing is the most efficient way to ensure this is accomplished.
Is your business technical in nature? Technical employees can be difficult to find and sometimes even harder to retain. The depth of the technical staff will be closely evaluated by the potential buyers. Ensuring key technical employees are shored up will be critical to a successful sale of the business.
Other key staff are individuals in departments that can essentially be absorbed by the new buyer, but must be maintained through the sale of the company. These individuals may be in your human resource, finance and information technology departments. Typically, the new buyer will have corporate resources to address these areas, but it is essential to ensure key members of these areas are retained through the transition.
How do you retain these employees? If you can, communicate with them about what is transpiring. These individuals are critical to your sale and being open and honest with them will go far. Next, work with legal counsel to develop retention agreements that offer meaningful compensation and benefits for staying on during the sales process. Finally, work with the potential buyers to ensure they know who is critical to the operation. After the sale has been announced and before the close, the new owners should want to craft potential offer letters that outline the compensation and benefits the employee will be offered.
If you have any questions, or if you would like to learn more about how to retain key employees during a sale, please feel free to call Aaron at 814-528-9405 or email AaronPhillips@DecisionAssociates.net.