It’s hard to keep secrets around the office if more than a couple people are “in the know” about goings on. So, when a few members of your team are aware the company is going up for sale, it’s hard to keep it as privileged information known only to a few.
Typically, when a company is prepping for sale, just the owners know initially. But the owners quickly realize they have to “bring others inside,” to get information crucial to the offering, such as financial statements, customer lists, inventory, etc. That’s information required to create the Informational Memorandum, a.k.a. the “IM” that’s shown to prospective acquirers. After all, you don’t need to have a Ph.D. to recognize that owners in their late 60s are preparing to sell when they start asking for historical quality-of-earnings statements and customer concentrations for three years running. So, let’s prepare messaging now.
Typically, the pattern of communication that we see in our M&A practice goes like this: At first, just the owners are aware of the sale. They engage an investment banker (the seller’s broker), who will request baseline information, including historical financial statements and trailing twelve months statements as well. That part of the process is easy to keep secret.
The next phase gets more complicated, in terms of confidentiality, because more detailed information has to be extracted from your accounting software or other record keeping programs; here’s where the requests are peculiar, e.g. obtaining all leases and mileage on all rolling stock. It’s this second phase where you’d create an inner circle of a few trusted team members. To prepare for the expansion of those “in the know,” consider putting a two-track communications plan in place; one for the inner circle, and—just to be careful —prep a communications plan for the company at large, in case the story leaks. (There’s nothing more destructive than gossip about a sale, rampant with fears of layoffs, that sends employees running off to work for your competition.)
For the inner circle, consider this message: You are seeking outside investment, which might result in the outright sale of the company if the terms are right. Further, explain that this search for an investor is being done to onboard more energized management, offer everyone more opportunity, and access capital for expansion. Make clear that you are selling from a position of strength and profit, and that the management and employees are the true value of the company, not the inventory and buildings. Underscore how essential the people are to preserving continuity and ensuring stability. Point out that acquirers never put millions into a company only to layoff employees and shrink the operation. Acquirers have an entrepreneurial bias for expansion.
As the preparation for sale proceeds, especially when you start getting site visits from prospective acquirers, you will find the need to bring more people into the inner circle, and by then, it’s increasingly hard to contain the news of a sale. (You can just about hear the comments in the yard after site visits from prospective buyers: “Did you see those suits walking around today? Are we for sale?”)
So, for the employees at large, be well-prepared with a message to them too, which is essentially the same one you delivered to the inner circle: We are seeking investment to grow, which many result in a sale, but the value of the company is in the employees, which an acquirer will be extremely eager to retain and reward. This is an exciting time of opportunity.
Take the time to draft these messages into written statements. But it’s probably best not to email these kinds of statements, because they can be easily forwarded. Instead, present the statement verbally at a company meeting, and take questions. Explain the importance of confidentiality.
Know that competitors will feast on the news that you are for sale, and they might imply that volatility around the sale will lead to a drop-off in service or inventory and employee flight. So, while prepping these internal messages, draft one for customers too. If news of the prospective sale leaks out, you’ll have a message ready. Finally, consider telling key customers about a potential sale long before they might hear any rumors, just to assure those high-volume accounts that things are good now…but they’re going to get even better.