What should I tell my VP of Sales who just told me he heard our company is for sale?
These days there are plenty of reasons for your employees to think that your company may be on the market. It seems that many buyers (and their advisors) are trying to turn up opportunities constantly these days. I hear about buyers and sellers at just about every industry event, in many blogs, podcasts and social media. Makes sense, right? With our industry continuing to consolidate for so many years in so many ways, smart people are going to pick up on potential changes, especially those that might impact them.
You may think you are immune because you are too young to sell, but that “dog won’t hunt” these days. Many middle-aged owners are growing and transforming their businesses themselves with additional capital brought by private equity or family office investors. In fact, quite a few owners in their early 30s are that are on just such a path.
It’s also true that even with careful attention to confidentiality, the fact that you are investigating the sale or other transition of your company may “get out” into the open. I’ve even had owners call me to say they aren’t for sale and don’t plan any change soon, but they still have employees telling them they hear the company may be put “up for sale”. Keep in mind that an assumptive statement like that may be a way to get you to open up about your plans even if the person hasn’t heard anything specific!
There are several ways to respond to an inquiry like this but the most important thing to remember: Never lie.
If you aren’t looking, say so. If you don’t have a deal in play, say so. You might also add that in fact, any landscaping business owner (or other “essential business” with recurring revenues) who hasn’t been contacted by another buyer or advisor or broker is probably really “flying under the radar”. Buyers and advisors are aware that baby-boomer owned businesses are all going to be transitioning in the next decade and are constantly communicating with owners to let them know there is help available and, in the case of some buyers, there are specific opportunities available for their company.
If a member of your senior management team asks you a specific question related to something that really is in the works, say so. I would explain that you are exploring some options on a highly confidential basis and that it is critical that it remain confidential. Acknowledge that as the owner of the company and to plan the best transition for the company, you are constantly keeping yourself informed and aware of the many opportunities and threats to the business for the next 3-5 years in the future. Beyond transitioning the ownership, your responsibilities for the company’s future will include other major shifts including the addition of increasingly sophisticated technology, for example.
Make sure your manager knows that you are concerned that confidentiality may have been breached by someone involved with the project. All the principal parties in an active deal are required to sign a commitment that they will not share information, including the fact that conversations are happening, with anyone other than those people with an absolute need to know (including employees and advisors). In keeping with protecting confidentiality, you may want to ask what the source of the information was. I would also immediately notify your advisors, buyers, and others involved so they know a breach has occurred. Ask them to remind everyone about the confidentiality and, if the source can be located, deal with it.
Maintaining confidentiality is important to getting the deal done and is important in the ongoing relationship between the parties. If confidentiality is breached, there can be a lack of trust that can be difficult to overcome. It can even cause damage that results in lower pricing or disruption of potential buyers. No one wants to be exposed to that kind of potential liability.
There are other reasons to maintain confidentiality that are equally important. You do not want to go into detail about the future with your team when you don’t really have any details. With no answers, you find yourself trying to respond to “what ifs” that may have no basis. This is surely a waste of everyone’s time and will create a lack of focus on your bottom-line results.
Have you been approached by your employees, vendors or peers with this kind of inquiry? What did you say? I’d love to hear about it. (Confidentially, of course).
Have you been thinking of selling to an external buyer or if you would like to explore your options for transitioning your company now or in the next few years, call me.
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