Should I tell my team I'm planning to exit?
"If you're talking about planning stages, I would say that's high-risk. And also, when you talk about employees, it's not the same for everyone."
Tristan Rice | Partner | SI Partners (M&A experts)
What do you think of the advice: "You should tell your team that you're planning to exit?"
Well, firstly, it depends on what you mean by telling them. I mean, yes, you should tell them before you actually do a deal, obviously, or at least when you do a deal.
But if you're talking about the planning stages, I would say that's high-risk. And also, when you talk about employees, it's not the same for everyone. There's a big difference between senior, trusted talent and everyone else. Making a general announcement is a mistake for a few reasons.
Number one, people generally have zero understanding of the M&A process or the implications of it, like what happens when you sell a company? What happens after that? We've found that the general assumption is that it means their job is at risk, which is the opposite in almost every case. So you're just going to set a lot of hares running.
The second thing is that it's an incredibly uncertain process. You say you're planning to exit, but in reality, you don't know when or if that's going to happen. So all you're doing is setting up lots of people with lots of questions, who are going to be making up all sorts of scenarios in their minds and you're the only person that can tell them any news. You're going to create lots of stress, lots of distraction, and you don't even know if anything's going to happen at that point. So, that's a general ‘no’ for me.
Then I think when it comes to senior people who are critical to the future and from a buyer's perspective, probably critical to the deal, then yes, there is obviously a point at which you need to tell them.
When you tell them will depend on their role, their status within the company, whether they have equity or options in the company. If they've got shares, if they're part of the furniture and you talk to them about all the big decisions, then yes, you should discuss it with those people in the planning stages. Not least because they probably need to be in the meetings you have with potential acquirers.
When it comes to the next layer down, let's say people who are going to get some value out of the deal, but are not going to be decision-makers in the process, then it's probably once you have a deal, and it's pretty close to completion, maybe a few weeks out. You've gone through due diligence, there were no major problems found, and you're now pretty confident it's going to happen. So those people you want to bring in so they understand what it means for them and they feel included and part of that journey. And then for everyone else, it's really on the day or the day after completion. That would be my view.
In Tristan Rice's opinion: These are the most important things to consider when planning your exit...
Okay, so there are two ways to answer this, there's an internal and an external perspective to it.
In terms of the internal perspective, the important things to consider are what you need to do to make sure the process is successful, what you need to know, and what attributes the business needs to have.
From an external perspective, what's important is what a third party can offer that will make the process successful and how you fit with them strategically and culturally.
Finding a balance between these two aspects is important. One thing to consider is what's beyond the money, because money shouldn’t be the most important consideration in planning. You can find out what your business is likely to be worth versus what you want to get out of it. Someone can tell you within a reasonable margin of error how much you'll get up front and how much you might get overall.
But the more important things to consider are why someone will buy your business and what your business needs from a third party to succeed. There needs to be a strategic rationale for a deal. If there's no strategic need, the chances of getting a deal done are reduced because M&A is hard, high-risk, complex, and expensive. So why would someone do it unless they have a strategic need?
Another thing to consider is what your role will be post-deal. What do you want personally from the business, from the transaction, and from the future? Because what your business can do and what it will do may be different things.
You need to think about what the personal motivations of the people driving the business are. If they don't want it, it won't happen. So it's important to think about what you want from the future. If you're never going to work for anyone else, that's a major consideration in M&A, because for any agency or consultancy business, it's going to be a prerequisite if you have a significant level of involvement in running the company. The buyer will want you to have a similar level of involvement for the foreseeable future.
If you've managed to remove yourself and build a management team that no longer relies on you, and they have enough equity to convince a buyer that they are committed to it, then it's different.
But if you're operationally involved, have meaningful relationships with clients and staff, then you'll need to maintain that and build it into a new reporting structure.
These are just a few things to consider when thinking about M&A for your business.
Tristan Rice's bio
Tristan leads SI Partners’ European M&A practice.
Tristan has extensive sector insight and contacts across the spectrum of marketing and technology services. Focusing on sell-side advisory to strategic and Private Equity buyers, he has advised on a wide range of complex and high profile deals for clients including ?What If!, Hanover, Brightblue, Karmarama.
Prior to joining SI Partners in 2006, Tristan built and sold the specialist media planning & buying agency Red Media, which he co-founded following several years in media sales. Red Media was acquired by BLM Group (now Havas Media) in 2005.
Humble promo of Tristan Rice and SI Partners
Incredible helpful, calm and super well connected. Tristan is the kind of person you want on your side in a M&A negotiation. Someone who can calm your nerves - the voice of reason as they say. And I'll say it again if you're planning to exit or planning to acquire an agency for the first time, make sure you have an advisor like Tristan and SI Partners on your side!
Daniel (Polymensa founder)
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