Once you’ve made the difficult decision to sell your company, there comes a time when you must inform those closest to you about the news. Telling your family that you are going to sell will depend on their level of involvement with the company. If none of your family members are employed in the business, sharing your plans will not be quite as sensitive of a subject. In fact, they may welcome the decision because you are about to have more time to spend with them, which is why you should not inform them until you are certain that you are going to sell.
It is an entirely different story if you have family that is on the payroll. Will a family member be taking over the company? How will any staff that is family be impacted by a change in ownership? These types of scenarios are when things need to be handled more delicately.
If a family member is taking over the business, there are several important considerations that can affect how the entire process plays out and how smooth the transition goes. It is important that you are sure that you and the new owner share the vision for the future of the company. If you decide to sell to them, and later learn that they wish to take the business in a different direction, you may not agree and emotions could lead you to change your mind, causing friction in the relationship that can affect the health of the business moving forward, especially if they are an essential part of the management team. Selling to a family member also means that it is important that there is clear and open communication regarding the valuation of the company and how they will be paying for the transaction.
Also, it is not uncommon for family members to feel it is adequate to seal a deal with a handshake, but a strictly verbal agreement can be very problematic. You cannot simply just hand it over. It is crucial that you have a tangible agreement in writing so that everything is clear, on paper, and you can move smoothly towards your exit. You will want it to cover details such as a third-party valuation, amount paid, payment schedules, if you as the initial owner will remain on payroll, and whether you will still be involved in the business and to what extent. It can be helpful to bring in a M&A professional to advise you through this process to ensure you have all of your bases covered and help you avoid making emotionally driven decisions.
Additionally, you need to be sure that the next generation actually wants to take over the family business. Sometimes an owner assumes that their children will take the reins without realizing they have no interest in doing so. Another scenario to consider is whether a family member has a sense of entitlement regarding the business that you may not be aware of. You’ll want to make sure everyone is on the same page. If you plan on selling to a buyer outside the family, and you unknowingly have a family member who thinks they will be inheriting the business, a great deal of resentment can arise and cause stress for employees, and problems within the operations of the company, as well as with the success of any merger or acquisition.
Timing is Everything
Regardless of to whom you are selling the company, the timing surrounding sharing the news is critical. Confidentiality is imperative to the sale process, so you never want to break the news too soon. The process can go many different ways. The deal can fall through, or you could change your mind about partnership or minority investments, or the buyer could take actions that alter the terms of the deal. You may even decide to go with a different buyer. In any case, the due diligence process in any M&A transaction can take several months to years. Communicating the news of a potential sale with too many people too soon can lead to issues such leaked information, distracted employees, and other factors that could end up negatively impacting the final terms or killing the deal altogether. It is best to keep the situation to yourself for as long as possible. By waiting, you are also ensuring that the deal is closer to being finalized and less likely to fail, so you avoid getting people worked up about a sale that is not even going to happen.
In any case, when you share the news with your family that you are selling your business, you will want to be open and honest about your reasons. Talk about the buyer and why you chose them. Discuss your plans for the future. Clear communication can help to avert misunderstandings or misplaced expectations. For example, say that your spouse thinks that you are now going to travel the world together but you actually plan on starting a new venture. Do not assume they know what is on your mind. Being clear and up front about your plans can keep things running smoothly at home.
Let’s Talk About Selling
If you are ready to sell your company, contact our M&A specialists at Benchmark International for the highest level of expertise and guidance. We understand that you’ve spent your life creating wealth and value. We know you want your legacy to be handled with care. We can help you sell for maximum value and get you on the path to the perfect retirement or the next phase of your entrepreneurial life.READ MORE >>