Mind Your Business: Staffing Issues During an Acquisition

By Steve Michaels

October 2008

Q.  I am purchasing an answering service and would like to interview and possibly hire some of the existing employees.  The seller does not want me to talk to them until after the close of the sale.  Can you give me a good reason why?

A.  The quick answer is that the seller is fearful that his employees will be afraid of losing their jobs and start to jump ship. 

The long answer entails several parameters that should be considered for a smooth transition.  A common occurrence when prematurely telling employees of a pending sale is that it could leak it out to clients and prospects.  With an asset purchase of an answering service, you are selling future cash flow; if clients panic and cancel their service, this lowers the value of the business and could affect the sale price.  Next, realize that the seller has enough going on without having to answer a myriad of questions from employees who are fearful about losing their jobs. 

The trauma of an impending acquisition can leave employers grappling with resignations, increased sick days, and worker malaise.  An example is Melissa, who remembers the stress and the sleepless nights during a corporate shake-up in a previous job.  Then, just after starting her new position, the owner shocked the staff by announcing that the company was being sold.  "It was very traumatic," she recalls.  "When rumors started flying, nobody knew what was going on.  They just told us that everything was fine."  This reassurance failed to soothe the employees.  Instead, uncertainty triggered emotional meltdowns.  A colleague in human resources, who knew she would be laid off, broke down while waiting for her day of reckoning.  "She was a nervous wreck, to the point of getting ill and taking days off," Melissa said.  Another agent, overwhelmed by the anticipation of big changes, went into a funk and began to slack off, prompting a dismissal threat from the boss.

These issues can be reduced when an employer communicates a change clearly, referencing how employees' roles will change and identifying a clear vision for the new organization.  But that information is better shared after the sale has been finalized and there is no doubt about the structural change of the workforce.

Steve Michaels is a business broker with TAS Marketing and can be contacted at 800-369-6126 or tas@tasmarketing.com for questions.