21 Apr When to Tell Your Employees You’re Selling: A Guide for IT Services Leaders
We’re diving into a topic that’s top-of-mind for many IT Services executives considering a sale: when to bring your employees into the loop during a business sale. Selling a business is a huge step, and emotional decision and naturally, you want to keep your team informed. But how soon is too soon? Let’s break it down.
The Natural Desire vs. The Strategic Approach:
As business owners, especially in the IT services space where your team is your product, you feel a strong pull to be transparent. You want to share the journey, right? But here’s the thing: M&A deals are complex. We believe that M&A is the most unnatural act in business, so dealing with employees and stakeholders the right way during this time is important. Disclosing too early can lead to unnecessary stress and even potential talent loss. The key is balance.
Who Needs to Know, and When? (Timing is Key!)
- Key Stakeholders (Early Stage, Concept Phase):
- Partners, co-founders, equity holders, and your board should be brought in during the initial concept phase. This is before any formal offers or serious negotiations begin. Their input is crucial for strategic alignment and buy-in.
- Executive Leadership Team (Early Due Diligence):
- Your core leadership team (C-suite, VPs) should be informed as soon as serious due diligence begins. They’ll likely be involved in providing information and facilitating the process. Confidentiality agreements (NDAs) are essential at this point.
- Finance and Legal Teams (Mid-Due Diligence):
- Finance and legal teams will need to be involved during the mid-to-late stages of due diligence. They’ll handle financial reviews, contract negotiations, and legal aspects. Again, NDAs are critical.
- Critical Project Managers/Technical Leads (Late Due Diligence/Pre-Close):
- If specific projects or technical expertise are vital to the deal, key project managers or technical leads may need to be informed during the late stages of due diligence or shortly before closing. This is to ensure a smooth transition and knowledge transfer. These people should have NDA’s in place.
- Direct Supervisors/Managers (Very Close to Close – Within 1-2 Weeks):
- Direct supervisors and managers should be informed shortly before the all-hands meeting. This allows them to prepare for potential employee questions and concerns.
- All Employees (Immediately Before/After Close):
- The general employee population should be informed immediately before or shortly after the deal closes. This is to minimize disruption and control the narrative. An all-hands meeting, followed by individual meetings, is recommended.
Key Timing Considerations:
- Confidentiality: Emphasize the importance of confidentiality at every stage.
- “Need to Know” Basis: Reinforce that information should be shared only with those who absolutely need to know.
- Controlled Communication: Stress the importance of controlled communication to prevent rumors and misinformation.
- Pre-Planning: Emphasize the importance of pre-planning the communication rollout.
Why the Delay? Addressing Employee Concerns:
Why wait? Because employees have legitimate concerns:
- Job Security: “Will I still have a job?”
- Compensation and Benefits: “Will my pay change? Will my benefits improve or worsen?”
- Company Culture: “Will the new owners align with our values?”
- Career Growth: “Will there be opportunities to grow?”
In our industry, talent has options. Premature disclosure can trigger anxiety and lead to valuable employees seeking other opportunities.
Crafting a Communication Plan:
This isn’t just about a single announcement. You need a comprehensive communication plan.
- Timing: Align announcements with key milestones.
- Messaging: Focus on the “what’s in it for them” aspect. Highlight opportunities for growth and development.
- Open Dialogue: Encourage questions and address concerns directly.
- Follow-Up: Don’t assume one announcement is enough. Ongoing communication is essential.
Walking in Their Shoes:
Remember, everyone processes change differently. Take the time to understand individual perspectives. What might be exciting for you could be unsettling for someone else. Be empathetic and available to address their specific concerns.
The Buyer’s Role and Your Role:
Don’t assume the buyer will handle all communication. You, as the seller, have a crucial role in ensuring a smooth transition. Collaborate with your advisors, legal team, and the buyer to create a unified message.
Key Takeaways:
- Strategic Timing: Don’t disclose too early.
- Clear Communication: Be transparent and address concerns.
- Empathy: Understand your employees’ perspectives.
- Plan Ahead: Create a detailed communication strategy.
- Collaboration: Work with your advisors and the buyer.
Don’t Try and Go it Alone:
Selling your business is a significant event. By prioritizing clear, empathetic communication, you can minimize disruption and ensure a successful transition for everyone involved. Don’t just take our word for it, this is where an experienced M&A advisor, like Revenue Rocket, proves invaluable. Advisors bring objectivity and expertise to the process, helping you develop a communication strategy that minimizes disruption and maximizes employee buy-in. Having a seasoned advisor on your side helps you maintain control of the narrative and ensures a smooth transition for your team. Revenue Rocket has been doing just that for almost 25 years!
We have a podcast playlist just for sellers: https://www.revenuerocket.com/podcast-episodes-for-sellers/
Have questions about navigating employee communication during a business sale? Contact Revenue Rocket today! We can help you create a communication plan that ensures a smooth transition. You can also listen to the full podcast here: https://www.revenuerocket.com/podcast/when-to-tell-employees-you-are-selling-the-business/