So you’ve decided to sell your business. There are many things you must now think about. One of the most important issues relates to your employees.
When to tell your employees you’re selling the business, and exactly how to tell your employees, are two of the most important decisions you’ll have to make.
In this article, we’ll cover the best way to inform your employees, the best time to tell them, what happens to your employees post-sale, and potential share implications.
When should you tell your employees that you’re selling the business?
This is a tricky one. Tell your employees too early, and you run the risk of competitors finding out who may attempt to poach your customers. You may also face employees seeking alternative employment if they get worried about job security. In my experience, telling them too early can ‘rock the boat’ and yet telling them too late and they think you’ve ‘gone behind their back’!
If you wait to tell your employees, you’ll have to withhold the information for the rest of the sale period. And since a sale may take up to a year to complete, there will be plenty of risks to confidentiality along the way.
In most cases, it’s best to keep the business sale to yourself until immediately prior to, or sometimes even after the sale. Waiting to tell employees protects them from their own anxiety and allows you to control the narrative. This will help keep your business sale on track and your business running smoothly.
My preference would be to tell them once you know the legals for the business sale are almost completed.
However, you may need to tell employees like your accountant or senior manager who oversee daily operations. And bear in mind that as your buyer and lenders will be requesting a lot of information during due diligence, talking to these employees early in the process can keep the process moving while preventing rumours.
How to break the news
Bring all your employees into one room if possible – obviously depending on the size of your business, but this kind of thing never seems to work so well on a Zoom call.
Start by telling them how much you appreciate their hard work and how important they are to the success of the business. Then tell them that you have decided to sell and explain your reason(s) for selling.
Next, talk about the buyer and their qualifications. Reassure them that you picked someone whom you trust to take care of them and that there will be little to no changes within the business and daily operations when they take over.
It’s wise to introduce them to the buyer as soon as possible for them to reassure your employees and begin connections. Try your best to keep the conversation positive and focus on the future of the company.
What happens to staff when a business is sold?
If they are being transferred, it’s important to let them know their employee contracts will be automatically transferred to a buyer under their existing terms (excluding pension rights). If it’s a share sale, everything will of course stay the same for them.
When the new buyer takes over, all the seller’s rights, powers, duties and liabilities are passed to the buyer, together with the employee contracts.
If the transferring employees have profit shares or share schemes, it’s important to let your employees know that these may not be transferable. It’s important to reassure your staff that the buyer will not be able to make any changes to their terms of employment unless the reason for the changes is an economic, technical or organisational reason, or the terms of the employment contract allow the buyer to make the change.
The Transfer of Undertakings Protection of Employment (TUPE), is a protection of employee rights when a business is sold to a new buyer. If an employee has been offered a transfer but chooses not to move on with the business, they are treated as though they have resigned.
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