One of the most important factors in any acquisition event is what happens once the deal closes. Although this may sound obvious and simplistic, the reality is the more planning you do with the buyer in advance of integrating all facets of the business, the better the odds of a winning combination after the deal closes.
Although this is important in all aspects of operations, perhaps it is most vital in the area of key employee retention. No matter how asset intensive your business may be, at the end of the day, the key treasure that any buyer is acquiring are the skilled associates on your team; their experience, longevity, creativity, knowledge, and dedication have been vital to your business’ success, and the success the buyer hopes to build on.
So how can you go about helping to retain these vital intangible assets once the deal closes?
Recently Insperity, one of the country’s most comprehensive HR service providers, published a really notable article on this important topic. Entitled, “Mergers and Acquisitions: How to Keep Employees from Leaving,” it was full of great information that I thought would be really helpful to many of you that are in the process of a transition to a new owner.
One of the most important concepts that they discuss (that we also suggest to our clients) is to make the concept of key employee retention part of your overall due diligence process. This is how Insperity describes it:
The usual due diligence explores the financials, processes and assets of a company, but to keep key employees, it’s important you widen your due diligence umbrella to include:
Integration planning: A process for including key stakeholders in the decisions for how the companies will be merged.
Communications planning: How and when the merger and any changes will be communicated to key stakeholders, including different levels of employees, shareholders and customers.
Organizational alignment: Implications of any changes required by the merger.
This more complete form of due diligence will give you the information you need to make more fully informed decisions about the merger, as well as communicate more accurately with employees.
Although in some cases it is impossible to communicate even with key employees prior to a transaction closing, where it is possible, bringing key employees in as early as conceivable is vital, and outlining how and when to do that during due diligence is a must.
The last bullet point above is probably the most important: No two corporate cultures are alike. As you get to know the buyer, his or her philosophy of management, and see how they lead and operate, it is critical that you compare that template to your company. Does it match? If not, how can you as the seller communicate to the buyer how the organizations need to mesh?
During due diligence, be sure to do as much due diligence on your buyer as they are doing on your organization!
Human beings are creatures of habit and this is just as true inside the workplace as outside (if not more so). Many of your key employees have probably been with you for 20-30 years and are used to a standard routine/management style/policies and procedures.
Although none of these may change at all post-integration, odds are good that the rumor mill will suggest otherwise, making it critical that you get out in front of the “water cooler gossip” with information about the deal and its impact on key employees as soon as possible.
Employees’ most immediate concerns will usually focus on pay, benefits, schedules and location of their work and should be addressed as quickly and fully as possible. It’s helpful to build a central location to announce merger news, receive questions and post answers to the most common questions. This usually takes the form of an intranet section or blog.
While your intranet pages are a start, make sure line managers also have the tools they need to answer the questions they’re sure to get. Encourage managers to frequently check in with their teams to keep an eye out for negativity and rumors that need to be addressed.
However, avoid making announcements too early. For example, you don’t want to say that no locations will close and have to backtrack later. This is where pre-merger due diligence comes into play.
Plan your communications ahead of time and make those communications fit your company’s cultural norms.
I have highlighted a couple of key sections from this segment to point out, based on our collective experience, how important it is to keep ahead of the rumor mill. We have found that fictitious information will arise to fill any communication gaps that you may have as you go through your integration and even pre-integration phases.
Nothing can destroy your integration plans quicker than false and erroneous rumors because sadly, many employees are prone to believe them. So stay ahead of the curve and at least with your key employees, share as much as you can, as early and often as you can.
And the second point is this: Don’t make the mistake of discussing the integration of your key employees with the buyer until after due diligence is over. As stated earlier, if the buyer doesn’t suggest it, point out that coming up with a plan of communication and integration of your key people is vital to start during due diligence.
As I read through the tremendously helpful article from Insperity, it reminded me of how important it is for you to hire an experienced investment bank to guide you on your exit journey. Post-merger integration discussions are just one part of the tremendously challenging process that selling a business creates.
Having a skilled, experienced professional M&A advisor by your side can make all the difference in the world in not only helping you to find a buyer, but close an optimal deal that keeps the business thriving in your absence (and retains your key associates).
Fortunately, Generational Equity and its team of seasoned, skilled dealmakers are here to help. Our team collectively has decades and decades of successful experience in helping business owners achieve their financial dreams. Our role is not one we take lightly. We know that entrepreneurs are the lifeblood of not only our economy, but our society as a whole.
Generational Equity was born long ago with one concept in mind: To bring Wall Street methodologies to Main Street. We have been highly successful in doing that and would love the opportunity to meet with you to do the same. If you are interested in learning more, please use the following links:
And special thanks to our friends at Insperity for creating such a thoughtful and useful article on post-merger integration.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2019 Generational Equity, LLC All Rights Reserved
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
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Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
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We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
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I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
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