Merger & Acquisition Insights

3 Ways to Honor Your Employees Through Your Exit Strategy

Posted on April 16, 2020 by Spencer Tenney

One of the great privileges of doing M&A advisory exclusively in the transportation industry is the people. So many of our clients are business owners who are good business people with big hearts. They expect every penny they deserve from the sale of their trucking or logistics company. They also want to make sure they secure the right “next” home for their employees and honor them through the exiting process. Here are three ways our clients have done that well.

1. Transfer ownership to the employees through an ESOP (Employee Stock Ownership Plan). This is an amazing gesture that can also be nice tax play for business owners. However, the execution of this transaction is highly technical and the hefty ongoing expense to manage this arrangement is not a fit for most companies under $100M in annual revenue. Do your homework before you commit to blessing your building through this option.
2. Gift completion and stay-on bonuses. In a recent 2020 deal, our client chose to bonus every one of his 200+ employees when the sale of his company was complete. He also gave them stay-on bonuses that will be earned once they stay on board with the buyer for a designated period. The combination of the two gifts was several million dollars. This gesture shows appreciation and also de-risks the transfer of ownership for the buyer – which may have influenced the all cash deal for the seller.
3. Select a buyer whose post-transaction strategy ensures key employees will keep their jobs and also protects the community. Not long ago, one of our clients turned down an extra 10 million dollars because the deal would have forced the transfer and relocation of 100+ employees. He cared too much about his people and about the economic impact their departure would create for their small town to give the highest offer serious consideration.

We coach our clients to be open-minded to the fact that their exit strategy goals may evolve as we view multiple offers during the sale process and as we examine how each buyer’s post transaction strategy affects our key people. There is not a right or wrong way to honor your employees. The key is to give yourself options. When our clients have options for how best to bless people the truly care about, they do amazing things that inspire the world around them, Tenney Group included.

Tags: Selling a Business

Category: Articles