Effectively Managing Acquired Employees
Transfers of ownership pose new opportunities and challenges for business owners. When you manage the employees of your acquired company, you’ll gain important institutional knowledge, avoid the time and expense of recruiting and training new employees, and set a path to meeting the goals you’ve set for your new business.
But first, you’ll have to conquer the fears and anxieties accompanying a change in business ownership. Navigating the transition involves ensuring the right employees are in the right positions and creating a company culture that addresses employee concerns and allows your newly acquired employees to flourish.
Evaluating Acquired Employees
Chances are you’ll know little about the employees of your new business since sellers usually keep a tight lid on the acquisition process. So, while you might have reviewed existing employment contracts, benefit plans, and payroll records, the employees have remained relatively anonymous.
As the new business owner, it’s up to you to get to know the senior leaders and establish productive relationships with them. The sooner you begin integrating key employees into your new organization, the better.
When evaluating acquired employees, business owners should:
- Determine which employees are essential
- Ask what is and isn’t working
- Invite employees to discuss their concerns
- Review employees’ customer relationships
- Review employee pay and benefits packages
- Review any existing contracts
Focus on the employees that are integral to your business such as those with special skills or licenses.
Communicate with Employees as Soon as Possible
Clear communication can go a long way in alleviating the uncertainty and anxiety that results from an ownership transition. Schedule meetings with all employees as soon as possible after the deal closes.
Enlisting employment attorneys and human resources professionals to assist with the integration process and positioning the transition. You will likely want to change systems and staffing. However, it usually takes six months to a year to adequately assess post-acquisition needs. In the meantime, it’s important not to create undue alarm or a mass exodus of employees concerned about job security.
Use these initial meetings to share your vision and objectives for the business, your management philosophy, and initiatives you’re planning. Introduce the new management team and any department heads you bring in and review their new roles. Encourage employees to discuss any questions with their immediate supervisors.
Retaining Employees You Want to Keep
Essential employees can be anyone in the company—from individual contributors to upper management. Consider which employees are experts in your business software. Who do other employees go to when problems arise in systems or procedures? Which employees have long-standing relationships with key customers?
Most of all, remember that existing employees played important roles in making the business one you wanted to acquire and conduct your evaluations accordingly.
Existing employment contracts won’t carry over to the new company, so you’ll usually have to renegotiate contracts with employees you want to retain. Consider using additional incentives and retention strategies besides retention agreements and non-compete agreements to keep essential employees.
Effective employee retention strategies should address employee needs and promote employee engagement. Some strategies to consider include:
- Retention bonuses
- Perks
- Awards and other recognition programs
If the sale is an asset acquisition, you can earmark employees you wish to retain in the purchase agreement. Doing so can help eliminate employees you don’t want to keep and effectively clean the house before the deal closes.
But, you’ll still have to create a work environment to keep key employees loyal, build trust, and show appreciation for team members’ contributions.
Managing Layoffs After a Business Acquisition
Layoffs are often a fact of life after a business acquisition. They might be needed to reduce inefficiencies, streamline operations, or cut costs. There may be duplicate jobs that need to be eliminated once integration is complete, or they might be needed when a new owner wants to change business strategies.
Once you have decided that layoffs are necessary, it’s critical to work with attorneys and HR professionals to ensure compliance with state and federal labor laws.
Specifically, you’ll want to assess whether your decision-making affects some employee groups, such as women or employees of color, more than others. An attorney can perform an adverse impact analysis to help avoid discrimination lawsuits resulting from the layoffs.
While employers aren’t required to give severance packages, it can soften the blow of layoffs, protect your company’s reputation, and improve morale among remaining workers.
Communicating with remaining employees about the layoffs is just as important as how you conduct the terminations. Your communication plan should be open and transparent. When possible, provide reasons for the layoffs and how the changes will affect team members who remain. Whenever possible, conduct all layoffs at the same time so that the remaining employees aren’t waiting for the other shoe to drop.
Managing Compensation and Benefits Under New Ownership
Before closing the sale, you made sure that compensation and benefits align with the company’s revenues during the due diligence process. But costs aren’t the only consideration when managing compensation and benefits post-acquisition.
For example, some mergers and acquisitions might require changes so post-merger compensation or benefits are consistent with those of the acquiring company.
Making wholesale changes to employee benefits or compensation can cause confusion, dissatisfaction, and even raise compliance issues. Work closely with attorneys and HR professionals when making these types of changes.
When buying a business, the final step is to transition ownership and assume control of business operations. Acquiring an existing business offers many advantages, including the opportunity to inherit a skilled workforce. And, if your sale agreement includes seller financing or arrangements for the seller to remain involved during a training and transition period, this too can smooth the transition with newly acquired employees. By prioritizing a seamless transition and fostering a supportive environment for your new team members, you set the stage for long-term success and growth in your newly acquired business.