The timing of employee information in the sale of a company plays a decisive role. When is the right time to inform the management level and the entire workforce? How should the information be provided?
If the management level of the company is informed too late, this may well lead to the dismissal of demotivated and insecure employees. For the company buyer, the retention of the management level is an asset that should not be underestimated, especially if the professional expertise is particularly important for the further development of the company. Therefore, it must be considered in good time how and when the executives can be included in the sales process.
Informing employees too early when selling a company can lead to failure
In this specific case, a potential buyer of a company concluded a comprehensive LOI with the executor of the deceased company owner. As part of the planned due diligence, various documents were requested to examine the company. In the process, the estate administrator and the company’s tax advisor also included the senior employees. In this project, staff were informed about the sale of the company at a very early stage. In the course of the examination process, some employees developed a life of their own that was dangerous for the sales process. Intensive contacts from the past with key suppliers and customers were used to develop their own interests. In the end, access to various documents and the possibility to contact suppliers and customers was denied.
Whether this is due to insecurity, existential fears or calculation is difficult to verify. The fact is, however, that especially when the owner of a company suddenly dies, suppliers and customers can quickly develop their own interests and instrumentalise employees of the company concerned.
In the specific case, some senior employees even spoke of a ‘Plan B’ that had already been developed. This ultimately led to a damaged basis of trust between the potential buyer and the management level of the company.
Professional counselling avoids conflicts
A succession advisor with transaction experience could have acted as a mediator here to maintain the necessary confidentiality between all parties and coordinate the entire process of selling the business. The interests and needs of the employees could also have been recognised and taken into account in time within the framework of a business mediation.
It requires considerable tact, both on the part of the estate administrator and the prospective buyer, to find out when and to what extent the management level of the company to be taken over will be involved in the ongoing process. Choosing the right time to inform employees in the sale of a company is therefore critical to success.
In the case described, the planned company acquisition ultimately failed because the managers in particular were not involved in the planned sale of the company to a potential buyer in a timely and goal-oriented manner.
What remains are only losers, both the employees and the managers, because the sales process has to be completely restarted. The heirs of the deceased company owner also have to live with the uncertainty of now finding a new buyer. The prospective buyer has invested valuable time - ultimately for nothing.
Many experts from K.E.R.N ? The succession specialists are trained business mediators or have acquired decades of their own experience with succession processes in medium-sized businesses.
Tips for further reading:
Preparing for business succession - 3 practical tips
Family foundation as succession solution
Advice traps in the process of business succession
Comment: Unresolved company successions endanger our prosperity
Free webinars on business succession
