What about us? The Future for Staff of a Selling Firm
Nov 04, 2015
M&A really isn’t all about the valuation and the payout terms. For sellers, there is usually a strong emotional attachment to the company that they’ve devoted years, resources, and their career to growing. A concern that we hear often from our sellers is how their employees will be treated after closing.
The popular media depiction of M&A, much like the media depiction of almost anything else, is highly dramatized. Movies depict ruthless corporate raiders slashing the staff at acquired firms to boost short-term earnings, while the former owners sit in the corner, dumbfounded at the hostile takeover they’ve just experienced.
The truth – at least in the A/E/C industry – is significantly less Hollywood-worthy. Instead, this industry consists primarily of what would be defined as small and mid-sized, privately-held businesses, with very few large, publicly-traded firms. Many small and mid-sized businesses see their staff as family, recognizing the employees who have stayed with the firm through good times and bad. This appreciation is true on both sides of the table – for both buyers and sellers.
Buyers in this industry generally realize that the major asset in the A/E/C business is the people. Buyers are almost never just seeking to buy your receivables and client names. They need people on the ground who can continue to drive business and make their investment valuable. The seller’s staff hold the client relationships. They have the collective firm knowledge that makes the company attractive to the buyer in the first place. The selling firm’s staff understands the culture of the local market and the unique design challenges that the buyer will face. Perceived redundancies, such as accounting or other administrative roles, should be investigated to determine the extent to which the position overlaps with a similar job at the buyer’s firm. Despite the potential consolidation savings, many buyers choose not to capitalize on the opportunity for a variety of motivations.
For all of these reasons, it is important to build time into the transaction schedule to develop an employee retention strategy. Both buyers and sellers need to make time to properly announce the transaction internally to their own staff. The announcement should occur shortly prior to closing, and the message should be crafted and delivered jointly to ensure consistency and openness. Staff on the seller’s side need to hear that this ownership transition will bring them new opportunities for growth and development, as well as future job security. Key employees may need to be enticed with a retention bonus. Any employees that will not need to be retained should be given as much advance notice as possible as well as a severance package, if appropriate.
Sure, buyers care a great deal about the profitability, potential synergies, and expanded lines of business that the acquisition is intended to achieve. But most buyers also realize that their best opportunity to realize the benefits of the transaction is with the full support of the selling firm’s staff from day one.
Click here for a free report with more data on the current M&A climate:Jamie Claire Kiser is Director of M&A Services at Zweig Group. Contact her at jkiser@zweiggroup.com
About Zweig Group
Zweig Group, a four-time Inc. 500/5000 honoree, is the premiere authority in AEC management consulting, the go-to source for industry research, and the leading provider of customized learning and training. Zweig Group specializes in four core consulting areas: Talent, Performance, Growth, and Transition, including innovative solutions in mergers and acquisitions, strategic planning, financial management, ownership transition, executive search, business development, valuation, and more. Zweig Group exists to help AEC firms succeed in a competitive marketplace. The firm has offices in Dallas and Fayetteville, Arkansas.
The popular media depiction of M&A, much like the media depiction of almost anything else, is highly dramatized. Movies depict ruthless corporate raiders slashing the staff at acquired firms to boost short-term earnings, while the former owners sit in the corner, dumbfounded at the hostile takeover they’ve just experienced.
The truth – at least in the A/E/C industry – is significantly less Hollywood-worthy. Instead, this industry consists primarily of what would be defined as small and mid-sized, privately-held businesses, with very few large, publicly-traded firms. Many small and mid-sized businesses see their staff as family, recognizing the employees who have stayed with the firm through good times and bad. This appreciation is true on both sides of the table – for both buyers and sellers.
Buyers in this industry generally realize that the major asset in the A/E/C business is the people. Buyers are almost never just seeking to buy your receivables and client names. They need people on the ground who can continue to drive business and make their investment valuable. The seller’s staff hold the client relationships. They have the collective firm knowledge that makes the company attractive to the buyer in the first place. The selling firm’s staff understands the culture of the local market and the unique design challenges that the buyer will face. Perceived redundancies, such as accounting or other administrative roles, should be investigated to determine the extent to which the position overlaps with a similar job at the buyer’s firm. Despite the potential consolidation savings, many buyers choose not to capitalize on the opportunity for a variety of motivations.
For all of these reasons, it is important to build time into the transaction schedule to develop an employee retention strategy. Both buyers and sellers need to make time to properly announce the transaction internally to their own staff. The announcement should occur shortly prior to closing, and the message should be crafted and delivered jointly to ensure consistency and openness. Staff on the seller’s side need to hear that this ownership transition will bring them new opportunities for growth and development, as well as future job security. Key employees may need to be enticed with a retention bonus. Any employees that will not need to be retained should be given as much advance notice as possible as well as a severance package, if appropriate.
Sure, buyers care a great deal about the profitability, potential synergies, and expanded lines of business that the acquisition is intended to achieve. But most buyers also realize that their best opportunity to realize the benefits of the transaction is with the full support of the selling firm’s staff from day one.
Click here for a free report with more data on the current M&A climate:
Jamie Claire Kiser is Director of M&A Services at Zweig Group. Contact her at jkiser@zweiggroup.com
