This is the fifth supporting post, further elaborating on “In Tough Times, your Acquisition Offer Might be an Asset Sale“.
5. How will you take are of yourself and your team? What happens to team members who go with the acquisition – What happens to their compensation? Do they get new equity? Are they required to sign non-compete agreements? What type of non-compete will you be required to sign and is it binding? What happens to any team members who are not going with the acquisition – do they get severance? Something else?
This is a tough area. You are negotiating an asset sale that must benefit your shareholders. But let’s face it, at the same time, you have at least an ethical responsibility to make sure employees are taken care of as much as feasible. And in order to get the deal done, you have to definitely take care of employees that the acquiror wants to keep/attract.
Be up front about existing compensation packages for each of key employees. Show the acquiror current pay, bonus and equity and as a starting point, ask for comparable packages for the team members moving over.
Get serious about any non-compete expectations right up front. You don’t want them as it makes it harder to get the deal done (and harder for you to move forward). I know that non competes have fallen out of favor, but they are still out there, particularly in an acquisition setting. Your acquiror would usually like them if they can get them. Confront it early, and get draft language ASAP if that’s real. Check with the desired team to make sure they were all “ok” with it. Many will refuse to sign as the job market remains strong, especially for top talent, so get that feedback to the acquiror to make sure the deal isn’t DOA.
And finally, after your years of sacrifice and hard work, you cannot forget to take care of yourself at least at some level. Job? Severance? Enough money to pay yourself as you shut down or resolve the corporate shell? (Hopefully you’ve followed my advice and purchased preferred stock in your own company!)
Each part of the series is available at the links below.