Your Exit Strategy and Employee Considerations

Employee value is critical to investors. They want to know that you have an experienced, talented team that will continue to profitably operate your company after your departure.

This doesn’t only refer to the senior management team. Perceptive investors look beyond the top rungs for a bench of strong, enthusiastic employees who can independently get the work done without the owner’s presence.

An ownership change on an organization can be positive or negative, depending on how the transition is managed. Employee performance may deteriorate as a result of uncertainty and fear of change. That’s why your exit strategy must consider the impact of a sale on employees giving special consideration to performance management and communication plans.

Performance Management

An effective strategy identifies and implements needed management changes before you consider a potential transaction. An established, strong managerial track record provides confidence to potential buyers or investors and increases the business’s value. You should consider the need to retain key management following the transition and whether you want to provide security for valued, long-term employees. The ownership change process offers an opportunity for you to take a fresh look at where the company is headed, establish new goals, identify missing talent, and take action to secure appropriately skilled employees.

Effective Communication

Effective communication is essential, and you must prepare a plan at the beginning of the process. You should limit knowledge of the pending transaction to the smallest possible number of people. This way, you avoid needless or premature distraction to other employees. Also, it’s easier to manage your message’s consistency to potential investors when working with a smaller group.

You must identify key individuals you need to involve in the process. These individuals are critical to preparing for a potential transaction. They are likely the same individuals who are most responsible for the business’s success.

As the transaction progresses, communication needs will change, and a larger circle of employees may need to be involved in due diligence work. Still, knowledge should be limited to the smallest possible number of people.

Consider the impact of a sale on employees giving special consideration to performance management and communication plans. 

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