The sale of a privately-held company is usually a once in a life time event. Many factors must be considered including timing, markets, performance of the business and risk associated with an owner having too much of their net worth invested in one “stock”; their company. As much as the business is a part of the owner and their daily lives, the time eventually comes when the business must be transitioned.
Many owners have built their company’s over the years from the ground up. A privately-held company usually reflects much of the personality of the owner and the culture, relationships, and friendships built over the years. The relationships an owner has built over the years usually include those with both customers and employees. Often, an owner has deep feelings towards their employees who have been a considerable part of the reason for the success of the business.
In each, and very, instance we have interviewed a prospective client business owner considering entering the market place, the question about the “safety” of the employees after a sale is posed. The relationships, and in many cases friendships, with the employees causes concern for their well being after a sale. An owner is concerned their employees will be “safe” and well treated after a sale.
When the time comes to sell, private company owners are affected by what are often unsubstantiated myths. Many business owners have seen situations in popular films where a new owner steps into the company and pillages the company, takes the employee’s pension funds, liquidates the company, and the employees are out on the street penniless.
Nothing could be further from the truth when dealing with the sale of a privately-held company. Many tangible and intangible assets and factors contribute to the success of a privately-held business. One of the greatest intangible factors that lead to the success of the business is the talent pool of the employees currently in place. The “know how” as an intangible asset within the employee base will be of critical importance to an acquirer.
Buyers acquire for many reasons. One of the prominent reasons is organic growth in a highly competitive market is more challenging now than ever. It is easier to acquire a company than grow organically. The employee base is mission critical to the on going cash stream that is the main reason for the acquisition. Therefore, a buyer is usually very concerned with maintaining the existing employee base and culture such that those employees remain with the business after the sale.
A buyer considering an acquisition will inevitably consider the longevity and stability of the employee base. Buyers concerned with minimizing perceived risk and growing the business. Clearly, the employees are critical to maintaining, if not growing the business. Therefore, it is in the best interest of the buyer to develop good relations with the employees.
Both the owner selling the company and the buyer acquiring the business both have consistent goals in keeping the employees after the sale. If there is a cultural fit between the buyer and the company’s employees, all parties should be satisfied in the long run. The transition must be handled with concern for the employee’s fears and uncertainty. Clear and open communication after the sale of the company will go a long way in “greasing the skids”.
eMergeM&A, Inc. No One Has More Experience With Privately-held Companies. No One.