Driving at night is a challenge the older I get. Those white lines just aren’t as bright as they used to be, or so it seems. Add construction detours or bad weather and it’s white-knuckle time. For the people in your company and your customers, navigating the road when your company is for sale is pretty much the same. They aren’t sure what to expect or how to feel in control.
Your #1 Goal
My last post was about leading transitions. I said that your top goals when you sell are that your business is ready to be sold for the highest value and your people are capable of and committed to carrying on after you leave. I also said that a big threat to a smooth transition to new ownership was the loss of commitment of your people and customers due to anxiety about the future.
Your buyer also has a goal: to see your company ready for an ownership change minus the traffic jams that many transfers experience. They want to see company transitions being pro-actively managed and people who are ready to carry on after your departure. That secures the value in your business and brings peace of mind.
The Big Question
When selling your company, you will face a crucial question: how and when to engage your people and your customers in your exit transition.
Conventional wisdom says don’t discuss the sale until you have a signed deal. Many brokers advise you to say nothing prior to having a letter of intent. Then you only make an announcement to a small insider group, eliciting code of silence.
It’s not uncommon to fear that if employees learn you are selling the company, 1) the information will leak out to customers and competitors who will undermine the value of the business, and 2) your people will become anxious and begin their own personal exit strategies, i.e., leave.
When there is inadequate information but a robust rumor-mill, your people do feel anxious, worry about job security, feel a loss of control and even abandonment—being “sold down the river.” Your customers will look into contingency suppliers and question whether they can depend on agreements given a shift in ownership.
Yet you know that in times of change, appropriate information decreases insecurity and increases a sense of control for people. What you may not know is that poor communication with employees has a greater detrimental effect on deal success than poor communication to any other group including customers. When you make communications a priority during an ownership transition, you are more likely to be successful than the average company in a merger or acquisition. (KPMG International’s “Mergers and Acquisitions Global Research Report,” 1999)
You need informed and engaged leaders in your company to successfully prepare your company for a high-value sale and transition to a new owner. In fact, in sales that failed to meet the objectives of buyers and sellers, almost 90% of managers reported being uninformed of the impending acquisition or plans for the post-close period. (Robert Blake and Jane Srygley Mouton found this years ago, and it’s still true today.)
Your Leadership Task: Be the Headlights
In leading your business in this ownership transition you must be the headlights on the company car. And your vehicle needs adaptive headlights. Your leadership light needs to beam around the curve in the changing company, anticipating conditions and providing visibility, control and a sense of safety needed to avoid productivity drifts and loss of key talent.
First, remember what your management philosophy and culture have been as you built your business—and stay true to them. Plan your communication strategy so that appropriate information and engagement happens throughout your exit planning. Arrange for sufficient transparency about the process. Be open to people’s and customers’ questions and concerns.
You can begin the communications planning by answering the following questions.
- What values am I known for as a company leader and as a partner to my customers?
- What are my assumptions and beliefs about my managers and people, e.g., loyalty, tolerance for ambiguity, integrity (do what they say they will do)?
- How effective and powerful is our rumor-mill? What impact is it likely to have on my messages?
- What actions will be congruent with my values, beliefs, and assumptions if I am to communicate effectively with my people and customers?
- What legal requirements, if any, must I follow?
Never Violate this ONE Rule
I was on a due diligence team of a buyer, and we attended an all-hands meeting of employees where the selling owner was announcing the recently signed letter of intent and what would be happening in the following months. He was obviously loved and respected by his people and cared about them. He closed his comments with this: “Don’t worry, nothing will change.” My don’t comment to you is, NEVER say “nothing will change.” It isn’t true; you can’t guarantee it; and it will come back to bite you every time.
My forthcoming book Exit Signs provides more detail and a set of planning templates for your communication strategy and for retaining customer loyalty and your revenue stream. I hope you will join my launch email list by clicking here.
How have you answered the question of whether, how, and when to communicate with your people in the course of selling your business? Share your experience in a comment below.