Telling Staff About Selling the Business: When and How

Selling your business is a deeply personal decision, and its effects reach beyond you to your staff. Whether you have three employees or 300, the question of whether to tell them you are planning to sell is one many owners struggle with.

So should you tell your staff you are thinking of selling, and if so, when? There is no perfect answer. It is a judgement call for each owner, but a useful default holds for most: confidentiality matters most early on, so many owners confide only in the senior people who are part of the deal and tell the wider team once the sale completes.

The risks of telling staff too early

Being open with your team may feel like the ethical thing to do, especially where you have built close working relationships. But telling staff too early carries real risks:

• Employees may feel their job security has gone and start looking for other work.
• Competitors may find out and use the information against you.
• Loyal customers may leave for competitors.

If any of these happen, a potential buyer can use it to their advantage in the negotiation. In a worst-case scenario, the disruption is enough for an offer to be withdrawn and the deal to fall through altogether. This is one reason owners work hard to stay a step ahead of the buyer and keep the process controlled.

Split the conversation into two groups

A practical approach is to separate your employees into two groups.

Senior staff and key employees lead by example and are respected across the team. This is the group you are transparent with about the possible sale, inviting their questions and keeping them updated. An acquirer will usually want to meet the management team first, so these people are influential in getting the deal done. An acquisition also often creates advancement opportunities for them, so there is a genuine upside to bringing them inside. Discuss the importance of confidentiality clearly, and where the means are available, consider a financial incentive tied to a successful completion.

The wider workforce is best told once the transaction is complete and the dust has settled. This may cause some short-term resentment, but it lets you present a proper transition plan alongside the new owners. Whether staff retain their roles or not, it is the approach that carries the least risk to the business and to your final outcome.

Remember: many deals never complete

Before you start dividing up your team, keep one fact in mind: close to half of all acquisition offers never result in a sale. Deals fall over for many reasons, from financing to a change of heart after due diligence, when the buyer no longer sees the business as the right fit.

So when you receive an offer, do not rush to tell your employees. Until it progresses to a firm stage, there is no reason to create fear and uncertainty over a deal that may not happen. For more on handling that early stage, read what to do when you get an acquisition offer. Releasing the news too early can also damage your brand and reputation, particularly if competitors or customers hear it first.

How to manage communication and confidentiality

Keeping a sale confidential can feel like a burden, but a clear communication plan makes it manageable if an employee starts to wonder what is happening behind closed doors. Lying is never a good idea, so prepare an honest explanation you are comfortable giving:

• Frame it accurately: you are exploring the possibility of a strategic relationship with another company. An acquisition is exactly that, and one that may benefit your staff in the long run.
• Be ready in case word gets out. The more people involved, the more likely it is. If it happens, take the person aside, explain the deal is not done and may not proceed, and ask them to keep it confidential so you can be the one to announce it when the time is right.
• If an adviser visits the workplace and draws questions, introduce them as a business consultant. Experienced exit advisers and business brokers understand these sensitivities and are usually on the front foot with them.

Above all, carry on as usual. Consistency avoids the suspicion and uncertainty that can otherwise spread quickly through an organisation.

A real example: keeping the sale quiet

A business owner we know faced exactly this situation. A husband and wife team had started a small manufacturing business more than 18 years earlier. They self-funded it, kept 100% of the equity, and grew it to over 60 employees. Then the company received an attractive offer from a larger business that was buying multiple small companies in the same space. The offer was significant enough that both could retire in their forties, and it was too good to turn down.

There was one hard problem: how would they tell employees they considered family? They decided it was in everyone's best interest to tell staff on a need-to-know basis. The senior managers who were part of the negotiation were told and sworn to secrecy for the good of the outcome. The rest of the team had no idea through the negotiations and were told only once the deal was finalised.

The wife spent the whole sale process wrestling with the conflict. She was usually open and transparent with her employees, yet now she was keeping a secret that could affect their livelihoods. After everything was signed and she could finally tell her staff she had sold the business, her emotions got the better of her and she broke down in tears.

At the time the staff were in shock. But fast-forward a few years, and when the couple see their former employees around town there are no hard feelings. They were even invited into a private group for former employees. The team came to understand that keeping the sale quiet let the owners close on their terms, which meant more job security for the staff at the time.

The lesson runs through this whole question. Telling staff early can feel like the right thing to do, yet it can jeopardise the deal and leave everyone worse off. Handled with care, keeping the sale confidential until it is firm is often the best thing you can do, for yourself, your business and your employees.

Where a good adviser fits

Deciding when and how to tell your staff is one of the more human parts of selling a business, and it rarely has a tidy answer. Planning the conversation deliberately, rather than letting it happen by accident, is what protects both your team and the deal.

Exit Advisory Group helps owners of businesses in the $3M to $100M range manage a sale end to end, including the sensitive human side of it. To see where this sits in the wider journey, read the business sale process, or explore our business sales service.