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Confidentiality vs. Employee Retention (a Fine Balancing Act)

By Generational Group

05/29/2023

Probably one of the most common questions we get from business owners that attend our Growth and Exit Strategies conferences is this: At what point in my exit journey should I let my associates know my plans?

Our answer is usually the same: It all depends…

Several factors should come into play. First, realize that you will likely need to include many members from your executive team early on. Some of the questions that will arise during due diligence will require input from department heads such as HR, accounting, and sales. If you are manufacturing a product, your buyers will also need input on key questions from your VP of Manufacturing.

So, these key folks will likely need to know early on. It gets even more complex when buyers start to visit your business. Some sellers will limit those visits to after hours but that can only work for so long, buyers like to see activity and activity = people.

This is one of the key reasons you should invest in hiring a professional M&A firm to guide you through the entire process. Our Generational deal teams have decades of experience in helping our clients navigate the confidentiality vs. employee retention challenge. One key rule of thumb is this: Odds are good your teams will eventually find out about your plans, and rumors, gossip and backbiting can do even more damage to a sales process than you can imagine.’

Communicate with who you need to as early as you can. Another way to help this out is to have the buyer set aside retention bonus money for your key folks as a way to ensure that those who are vital stay for a stated time frame (often a year or more) to receive the bonuses.

There are lots of other methods that can be used both financially and non-financially to keep associates focused and all pulling in the same direction. To learn more about this vital topic, please listen to what a few of our clients have told us about it:

Another great way to learn how to balance confidentiality with associate buy-in is to attend a Generational Growth and Exit Strategy conference. Not only will you learn a tremendous amount about the pitfalls to avoid, you will also have the opportunity to meet with a Generational professional while there to confidentially discuss your specific situation and plans. These meetings are no obligation and complimentary, and we hold them throughout North America. You can learn more here.

Bottom line: Be very cautious when you decide to bring your associates into your business sale process. Confidentiality is obviously critical, but so is the need to get in front of the rumor mill.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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