Tell ?
Once upon a time , I helped a good friend through a transaction to sell his closely held public company to a larger S & P 500 size public company . We involved the traditional group of employees you would expect : CFO , COO , and CMO . About two-thirds of the way through the process , it became clear that the CFO would not have an ongoing role after the transaction . Despite the fact that he was up for a sizable bonus to get the transaction done , he put his own interests ahead of the company and tried to scuttle the deal . He then put together an alternative bidder group to try and buy the company . Totally distracted and at odds with his future , he both overtly and indirectly caused major problems . In the end , he held the transaction up by at least six months , added multiple millions in legal fees and other expenses , and was subsequently terminated and received nothing for his efforts . It was a miracle the deal ever got done !
So here ’ s the lesson : Once you ’ ve decided to go through the process of bringing your company to market , it ’ s common to wonder who , if anyone , should know within the business . How you handle this communication challenge is critically important because if done incorrectly , it can create massive problems and wreck value . It ’ s critical that anyone on your team who will be involved in the process in any way has a stake in the outcome . It doesn ’ t have to be a major stake , but it ’ s a terrible idea to go to your senior team and say , “ Hey , we ’ re going to take this asset that we ’ ve all built together to market and sell it . You ’ re going to help me with the process , and I ’ m going to make a bunch of money and not share any of that with you .” Even if you ’ re not comfortable committing to a dollar amount , it ’ s perfectly acceptable just to let the small group know that they ’ ll be taken care of to some extent .
So how many people should you tell ? The short answer is as few as absolutely necessary . When you go to market and you ’ re working with your exit team and interacting with multiple buyers , it is a huge distraction . Your senior team needs to pick up the slack created by your lack of focus on the business and ensure that productivity and profitability don ’ t fall off . The process of selling your business takes longer than many people expect . That last thing you want is to get deep into negotiations and have the buyer find out that your numbers declined the last quarter . That decrease can dramatically affect your valuation as well as the confidence the buyer has going forward . It can even , in some cases , kill a deal . Chances are it was due to the fact that your senior team didn ’ t have their collective eye on the ball . That buyer will have zero pity for you and certainly won ’ t accept the excuse that the only reason for the dip was because of the pending sale .
It ’ s also important to acknowledge the fact that human beings are wired to jump to conclusions . So , when you say that you ’ re going to sell the company , your employees immediately assume that means they ’ ll lose their jobs . They have little faith that the new buyers are going to want to retain them , or they may be concerned about whether their current position will still exist when ownership changes hands . Often times , you ’ ll start to lose some of your “ A ” players while you ’ re in the process simply because they ’ re afraid . If the buyer gets wind of the mass exodus of critical talent , that can blow up a deal . You also can , unfortunately , give employees a little too much leverage to put their interests ahead of yours , whether overtly or subconsciously .
Outside of work , I don ’ t recommend telling your friends or your extended family . You probably need to tell your spouse or partner because it ’ s an emotional process , and they ’ ll likely know that something is weighing on you . But you want to keep a possible sale as confidential as possible because there ’ s a good chance you go through the process but decide not to exit for one of several possible reasons .
Treat the sale of your company as a highly confidential , delicate negotiation that could be impacted by many different issues and do all you can to minimize the likelihood of those issues — employees and confidentiality being huge ones !
If you want to learn more about getting ready to exit , please visit Align5 . com . n
John Ratliff is a serial entrepreneur with over 25 years of experience . He is currently the founder of align5 , a strategic consultancy based out of a professional clubhouse ( alignSpace ) in West Chester , Pennsylvania . John co-founded align5 in 2013 to advise growthcompany entrepreneurs and family enterprises on a variety of strategic issues , including sell-side and buy-side M & A .
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