Do I need the support of my managers?
Monday, July 30, 2007/
Like it or not, your present managers will be heavily involved in a successful sales process. By TOM McKASKILL. By Tom McKaskill
Selling a business involves a series of steps that inevitably involve the senior management team and perhaps the second level managers or supervisors.
The major stages of selling a business are preparation, negotiation, due diligence, integration and on-going post acquisition operations. Within most of these stages, the current management are actively involved and they can either help make it work or scuttle it. Getting their support is, therefore, absolutely necessary.
Many entrepreneurs incorrectly believe that they can carry this process off by themselves and that they can continue to manage the business under new ownership. However, entrepreneurs typically make bad employees, and most smart buyers know this and so they look to the management team to provide the transition to new ownership.
This view from acquirers is not unreasonable. Entrepreneurs are used to being in charge, making decisions without justifying them, taking shortcuts and accepting risks, and thus don’t fit well into a bureaucratic structure where they have to report to a boss and take orders. In addition, they are most likely cashed up, want to take it easy or want to move on to their next big idea.
Similar logic can be applied to many in the senior management team. The CFO is unlikely to want to step down to being a branch accountant, the sales director to a sales manager or the marketing director to a product manager.
If they are all used to being part of the strategic decision-making process, they are likely to want to perform in that role again. Furthermore, they may all have done well out of the deal and want to move on to another venture.
The bottom line: few of the senior managers will go with the deal or stay long after the deal is completed. Smart buyers know this and therefore look to the second level management and key employees to make the transition successful.
The entrepreneur who wants the deal to be successful must find a way of gaining the support of second-level management and key employees in both the preparation for sale and in the transition of knowledge across to new ownership. If the people who have to make the deal work are uncertain of their future or resent the business being sold, they may well leave or work to undermine the process. The entrepreneur thus needs to bring them into the process in such a way that they will actively support the sale preparation and will be willing to transition to the new ownership in order to provide the continuity needed by the buyer.
Incentives need to be provided to management and key employees to encourage them to work towards a sale. This means ensuring that they have sufficient incentives in the form of shares, options or bonuses to do so.
Those that will be made redundant need to be provided with a bonus in order to stay until the sale is completed and then provide them with a buffer to allow them to be retrained or look for new employment. Those key employees who need to be retained need to be provided with significant incentives to willingly stay on for, say, a year to transition the business to the new owners.
Business owners who fail to put these incentives in place risk buyers walking away from the deal or facing a significant drop in sale price.
Accounting software does not underpay staff — humans do Stacey Price Healthy Business Finances founder
Google has updated its search algorithm: Say hello to BERT Lucas Bikowski SEO Shark managing director
Five ways to mentally prepare for the brutal capital-raising process Stacey Fisher Minnow Designs co-owner
You are not your job: Four work-life balance tips to ease you into Christmas Jackie Rahilly Appoint co-founder
Ignoring your ‘obnoxious roommate’: What this founder learnt when she met Arianna Huffington Michelle Gallaher ShareRoot CEO