Preparing Employees for a Change in Ownership: A Guide for UK SMEs

• Succession planning helps to protect the value of your business during the sale process by identifying critical roles, safeguarding knowledge and ensuring the business can continue without the founder.
   
• Having clear, timely communication helps to reduce the risk of unmanaged rumours about the deal, and the future of the business.
   
• Employees are an asset, particularly during a handover, keeping them informed through ownership change ensures continuity through transition.

There is a growing trend among UK-based small business owners looking to sell or transition their companies. While the cost of doing business in the UK is ever-increasing, some hard-working long-time entrepreneurs are simply looking to pursue new opportunities, secure their retirement or scale their business with a larger organisation.

The trend underscores the importance of managing changes effectively through communication and succession planning.

Small business owners should review their succession plans before considering a sale or transition of ownership. This process will identify key roles and processes, allowing the team to feel prepared for continuity. A pre-prepared succession plan adds value to the business and demonstrates to potential buyers that their potential investment is well-managed.

Deciding on the path to selling or transitioning a company, especially one built from the ground up and still founder-owned, is both a challenge and a golden opportunity, but it also carries responsibility.

What happens to the employees who helped make it all happen? What do their futures look like in the hands of new ownership? Both ethically and practically, it can be hard as an owner to know what you owe your team during negotiations. The eventual transition or handover also requires careful planning and communication.

With every business sale unique, how can SME owners prepare their employees for a change in ownership while maintaining high morale, productivity, and trust?

In any office or workplace, the rumour mill works all day, every day and never takes a break.

Regardless of how quiet it’s kept, a pending business sale is never a secret.

The longer leadership goes without addressing the elephant in the room, the more uncertainty builds, and the more people look for other options. This can actually hurt an acquisition deal, since key employees may be a factor in the deal.

By bringing these high-value employees on board early in the process, enthusiasm for the deal can be determined, and if necessary, incentives to make staying more attractive can be offered. At the same time, maintaining regular, transparent communication will help you keep rumours and untruths at bay.
 

Timing your announcement

Deciding when to inform staff of a pending merger or sale can be difficult.

Tell them too early, and confidence can falter if the deal falls through. The staff now knows the company is being actively considered for sale or acquisition, which can also lead to a mass exodus or the quiet quitting of employees trying to hedge their bets in case the acquiring owners decide to cut staff, reduce payroll, or replace them with handpicked alternates.

Tell them too late, and suddenly the entire arrangement can be interpreted as being a clandestine, backroom deal done without regard for the repercussions to the workers who will be caught in the middle and might suffer as a result. Morale suffers, suspicion mounts, and exits occur, hurting productivity and possibly affecting the deal. 

Your staff represent part of the business's value, so a sudden departure of talent could affect the buyer's perception of the business's viability.

Legal and contractual considerations

Considering the legal and contractual issues relating to staff must also be taken into account when planning communications. 

Employees have rights under employment law that may apply during a change of ownership. Notice periods, transfer obligations, and contract terms must be covered to ensure compliance and protect employees.

Review contracts with HR and legal advisors as needed to ensure obligations are met.

Preparing statements and updates for staff

Once the ink is dry on the deal, immediately issue a statement that not only discusses the details of the change in company ownership but also the reasons for it. Discuss in frank terms, as much as is feasible, about how this transition will affect each department, and/or position with the company.

This degree of candour will go a long way in addressing and allaying employee concerns and building confidence about their future with the organisation.

Planning the announcement

Once the office has been officially informed, follow up with the article/articles/tips-effective-business-meetings/ for all staff, or at the very least for leadership.

Detail how the deal began, how it proceeded, and how a final agreement was reached. This is the time to present a compelling vision for the company's future and how it will positively impact each team member.

For now, remaining focused on the big picture will help outline the benefits employees will enjoy once the transition goes through.

Explaining the timeline and next steps

Employees will want to know exactly when the company will officially change hands, and current management will end. This helps build employee confidence by demonstrating an orderly transition and reassuring them that there are no nasty surprises waiting for them once the smoke clears.

Communicate the expected timeline, and express enthusiasm for the deal and confidence in the new owner and management.

Financial implications for employees

You can reasonably expect that employees will have questions about how the change in ownership will affect their positions, pay, pensions, benefits and more.

If you address this, even broadly, in the initial announcement, you can ease any anxieties and maintain trust. Provide as much detail as possible and clarify any incentives that are coming in or being maintained under the new leadership.

The introduction of the new owner and their executive team should be done as soon as possible, before their goals and intentions for the future of the organisation are broached, since employee perception of the new owner will heavily influence how those plans are received.

Change is difficult and terrifying, and hearing the intentions of a faceless organisation will only add to that fear.

Leadership and culture considerations

Culture shock is common in the aftermath of a change in ownership. New leadership should be integrated gradually, along with new procedures and values, giving staff time to adapt.

Allowing staff to maintain their familiar routines, creating a system for recognising achievements and supporting the transition could be valuable. Most of all, promoting open dialogue will be crucial for morale and maintaining productivity.

Update Team Members Regularly

Transition will take time to implement.

Maintain transparency throughout the process by keeping employees in the loop with regular updates and progress reports.

Maintain consistency in the messages by always returning to the ongoing narrative of the benefits the transition will bring and how it will help move the company forward.

Optimism at this stage is paramount; we want to build enthusiasm and anticipation for what is happening. Give employees the opportunity to voice their opinions and concerns.

Preparing for post-sale success

New leadership should monitor progress, seek feedback from employees, clients, and other stakeholders, and celebrate milestones to help them integrate positively into the team.

Post-sale support and continuous communication keep employees engaged and feeling considered throughout the transition process.

Some mistakes are commonly made, even with the most careful panning. To avoid undermining a smooth transition process, avoid these pitfalls:

• Excessively delaying communication - Don’t create a situation where silence lets rumours run wild. You could risk an exodus of staff, and just create anxiety that makes your team unproductive; some may take those feelings home with them, also.
   
• Overloading employees with information - Keep updates clear, concise, and phased appropriately to keep people from feeling overwhelmed by impending change.
   
• Ignoring legal or contractual obligations - Failure to review contracts, notice periods, or transfer obligations can lead to disputes, compliance issues, and devalue your business.
   
• Neglecting internal culture and morale - Your staff are people with emotions and routines, they have invested more than their time and skills in your business. Failing to acknowledge this can be detrimental to engagement.
   
• Assuming employees will automatically stay - Even top performers may leave if incentives, clarity, and reassurance are lacking. Proactively address retention concerns and keep an open dialogue.

Every team has unique dynamics, so try to anticipate as many potential issues as you can during the sales planning process. It will ensure that your business thrives through the profound changes.

An ownership transition is an exhausting undertaking for all parties involved. Along with planning, organisation, problem-solving, and communication, patience is absolutely essential for the process to move forward in an orderly fashion.

That’s why it’s so important for the process to start early and progress incrementally.

A period of staff adjustment will be needed as they come to terms with this massive change in their working environment.

It should be understood that even when all these steps are followed, obstacles and roadblocks will still occur. Not every employee will be on board with the changes, but by maintaining an open channel of communication early in the process, we can execute an ownership change without a massive disruption to worker productivity and morale.