When you decide to sell your company, who do you tell and when? We’ve seen this difficult decision handled in a multitude of different ways, with vastly different results. The goal of this week’s Deal Note® is to share with you the best practices of sale process disclosure, based on our 23 years of experience.
As an owner, you want to ensure you have sufficient internal resources working on the sale process to ensure a successful outcome. In addition to your deal team professionals (explained in Deal Notes® 009 and 075), you need support from your employees in various functional areas of your business, to gather information for the sale process, and ensure that said information is highly accurate. The difficult issue is that the more employees who know you are contemplating a sale, the greater the risk that your other employees, customers, or suppliers may find out. Eventually, as you approach or complete the sale, you will want to inform all employees of a sale, but you will want to do so in a controlled manner, as opposed to an unintended premature leak. Such leaks usually lead to disruptions to the business, which is especially detrimental when you are trying to make the near-term projections set forth in your CIM (ref. Deal Notes® 20 and 100).
To get the balance right between the contrasting issues above, the best practice we have seen is for business owners to first select a small handful of senior employees and second offer them a meaningful sale bonus (in writing) to give them an economic incentive to have a favorable attitude toward the sale process and to include in that document a requirement that they must keep these discussions confidential.
Have a great day everyone,
Ryan Kirby
Junior Partner
