A Market Pulse Report regarding Q1 business sales for 2017 revealed that after price, concern for what will happen to their employees after a sale tops the list of sellers’ priorities. In fact, 70% of owners stated that employee welfare after a sale was a top concern in this report, published by the International Business Brokers Association(IBBA), M&A Source, and the Pepperdine Private Capital Market Project.
This reflects what Calder Capital has experienced representing small and mid-range business owners over the years. Many, if not most, owners have spent years building their businesses, and employee talent is always an important part of that. Working with the same people over years, these owners consider their employees to be a part of their family, and, as a result, they want to ensure that their jobs will be preserved after the sale and that they will continue to be treated fairly and well. This is a valid concern, given that, after a sale, the control will be out of their hands.
This is one reason why finding the right buyer is more important than finding a buyer. And it emphasizes why it’s important to talk with multiple parties before agreeing to move forward with one buyer. Calder Capital Managing Partner Max Friar noted, “Finding the right buyer, the right fit for your employees, legacy and continuity of your company is like finding your spouse. Your future, your ability to rest at ease knowing what you’ve labored on will be taken care of should not be left to the first party that knocks on your door. It’s absolutely worth it to interview multiple qualified parties. You’ve spent thirty years building your company. Spend three months to make sure you’ve picked the right transition partner!”
A good M&A advisor will work closely with a seller, learning about the business and the seller’s values and priorities so that buyers with conflicting interests can be identified early or presented as they are – a less than ideal match for a sale. Calder Capital also has access to numerous networks of potential buyers so we can cast a larger net for our clients, locating people that other business brokers would not have access to.
What can a seller do to ensure a better transition and result for the workers he or she cares about? There are a number of possibilities:
Communicate with the buyer – The time period preceding the sale is when buyers can “sell” their workers as valuable and necessary. A good selling Prospectus drafted by your M&A representative should highlight the skills and contributions of employees. Sellers should be open about why their employees are assets and what they want their legacy of ownership to be. Good buyers recognize that small business is built on the backs of the employees and often their chief concern is maintaining the employees and work culture.
Be upfront and flexible with workers – Generally, sellers should not alert their employees of the possibility of a sale. Despite that most, if not all employees’ jobs will be safe post-acquisition, knowledge of a pending sale creates uncertainty and fear amongst employees. Employees may leave seeking a more certain future. Or worse, they may attempt to compete.
If it looks like there will be redundant positions after the sale, sellers can communicate this early on to give their workers time to look for other positions. They can offer flexibility in their work schedules as well, giving them the freedom they need for interviews or job searches.
Sell when the business is successful – If the company being sold is thriving and profitable, that’s the best security for employees. It demonstrates to buyers that the current employee pool and management works well and doesn’t need to be changed.
If you are thinking about selling your business either now or in the future, don’t hesitate to contact Calder Capital. We would be glad to further discuss our process and what we can do to help you leverage your investment into a successful sale that will ensure both your own goals and the success of your employees going forward. Currently it’s a good time to sell a business, but the longer you plan for a sale and the more flexibility you allow for, the better the outcome you can expect.