InSight

Exit and Growth Strategies for Middle Market Businesses

Selling A Business – What Happens To The Employees?

By Gerald W. Lindsay | Sep 23, 2011

A sale will have negative effects on my employees.

 

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The single most valuable asset to a buyer is the employees.  Imagine the worst case scenario…the buyer purchases a company and the key employees depart.  An empty facility full of equipment that does not produce revenue would be a disastrous investment.  For this reason, buyers are Business Meetingextremely cautious that the employees are properly motivated and happy to stay post-transaction.  Often times, buyers will offer multi-year employment agreements that allow employees to participate in the profits of the company.  The mantra is “let us help our management so they can help us grow the company.”

If your buyer is a Private Equity Group (PEG) there are further reasons to breathe a sigh of relief.  A PEG’s purpose for existence is to build a portfolio of companies that can outperform traditional investments.  The management team of the average PEG spends over 75% of its time seeking new acquisitions to invest in.  They typically do not get involved in the day to day operations of its portfolio companies, unless there is something that the portfolio company seeks assistance and advice with (new financing, introduction to a new customer, guidance on how to implement new software, board level management).  Therefore, PEGs look for opportunities where strong management teams are already in place.

 

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Posted by Gerald Lindsay.


One Response to “Selling A Business – What Happens To The Employees?”

  1. Vasco says:

    Especially in today’s economic climate, it would be unlikely that employees would resign purely because their organisation has been acquired. The point about PEGs is also very true.

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