Merger & Acquisition Insights

How to Protect Your Employees Without Shrinking Your Pool of Buyers or Discounting Value

Posted on June 25, 2020 by Fusebox Marketing

“I don’t want to include that buyer in the sale process because they will get rid of all my people after the sell.” Protecting your employees is a good desire. After all, they are the ones doing great things in your business every day and who have made it what it is today. But is this a constructive way to approach an industry exit? It depends…

If this is something you feel strongly about…perhaps a non-negotiable item, I have two questions for you.

Why do you think that a buyer would not desire to keep your people?

Certainly, it is not uncommon for acquirers to use acquisitions as instrument to create new cash flow through the elimination of redundant expenses – labor being one of many. However, from Tenney Group’s vantage point, acquisitions are also used to target and upgrade human capital. The cost of doing business in the transportation industry is becoming unsustainable without materially operational and strategic adjustments. Many buyers understand that to win the future, you need top talent and sometimes that can’t be homegrown.  So…be careful about making assumptions or broad generalizations when it comes to what a buyer may need from your talented team. Buyers are keeping all options on the table to meet the incredible demands of our industry right now.

What are you doing to make sure that a future buyer places a premium value on the people within your organization?

If you listened to our recent webinar on “How & Where to Build Value in a Tough Economy,” you heard the story about a buyer that was initially looking at our client’s 100M company as a “bolt-on” acquisition.  Once a buyer has an existing platform company in the transportation space, they typically use bolt on acquisitions to add revenue streams and add efficiencies. Buyers traditionally place the highest value on their initial platform company because it is the foundation for all future success. All future growth will be absorbed into the platform company’s leadership team and operational systems. Though this buyer had already designated their platform company, the quickly realized that our client’s company was the stronger of the two companies. Not only did this discovery change the value of the business, it changed everything about what the buyer expected to do with their post acquisition integration strategy – especially their plans around keeping our client’s people. Had our assumed that the buyer would not consider this option, he might have left approximately $15M on the table and missed an opportunity to find the perfect “next home” for his people. If you are concerned that prospective buyers won’t appreciate your leadership team the same way, then it is on you to work on that. Make your people more valuable by giving them responsibility and authority to build business value. And, most importantly, do what is often the hardest thing for us business owners to do…get out of their way so they can do extraordinary things.

If you have questions around this issue, please reach out to Tenney Group to learn how other transportation business have effectively protected their people without taking a discount on their business sale.

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