A company succession, whether it is within the family or a sale, already triggers uncertainty for most entrepreneurs. This is even more true for the company’s employees, whose jobs depend on the success of the succession. In the run-up to a succession, the question therefore usually arises as to when employees should be informed or involved.

In our counselling practice we are very often confronted with this question. If not, it is actively addressed in the counselling. In the case of a transfer within the family, the problem usually takes care of itself because the successor is known and already works in the business. The challenge here is a smooth transition of responsibilities, which is all too often influenced by high emotionality. In these cases, it has proven to be very effective to jointly define and describe the handover process with clear milestones even before problems arise.

Intra-family generational changes require clear responsibilities

If, on the other hand, a company is to be sold, the situation is different. Since a sales process can take between one and three years and is often accompanied by setbacks, secrecy is often more crucial for success. If the employees learn about the intention to sell at the very beginning, the uncertainty about the future of the business grows with increasing duration of the sale and possibly the pressure to look elsewhere. If investors are also involved, negative headlines or even rumours about staff reductions and over-inflated corporate cultures are added to the mix. All this can lead to a wave of redundancies and thus to the sell-off of valuable company know-how.

Informing employees about the sale of a company should be done later

In order to ensure confidentiality in the context of a company sale, there are a few things to consider. First and foremost, it is important to check whether the entrepreneur has already ‘blabbed’ in advance. If this can be ruled out, it is advisable to work out a strategy for the entire process and to consider all eventualities as far as possible.

These include, among others, the following questions:

Which documents are necessary for the sales process and can they be obtained unobtrusively by the entrepreneur?
Do staff members have to be taken into confidence under a duty of confidentiality? Are additional confidentiality declarations necessary?
How can interest be aroused when advertising the offer for sale and still maintain anonymity?
How can confidentiality be safeguarded with prospective buyers when anonymity is lifted?
Where do the negotiations take place?
When and in what form can interested parties take a tour of the company?

If all steps of the process are neatly planned, organised and adhered to by those involved, a secret process usually succeeds. Afterwards, however, it is equally important to organise the subsequent communication with employees, customers and suppliers in a timely and professional manner. Particularly in the case of a transfer of business, it is important to ensure that employees are informed in writing about the sale of the company in good time, as required by §613a of the German Civil Code (BGB).

Markus Neuner, Deputy Head of Legal Affairs, Taxes at the IHK Munich and Upper Bavaria advises at the Pfaffenhofen District Entrepreneur Day on the topic of business succession that company owners should seek professional support for their business succession: “A business succession is usually a unique life decision of an entrepreneur accompanied by many emotions. The right communication with all those involved is an essential factor for the success of this challenging process?