Should You Tell Your Employees Your Business is For Sale?

Should you tell your employees your business is for sale?  In most cases, no.   

The way I tell clients about this is from my own experience.  I started a technology company (Ibex Technologies) and grew it to thirty employees.   It was a nice, close-knit company with some outstanding employees.  I always had an open door policy, but after my decision to sell and negotiations began, the door was closed more and more often.   Since I had tried to base my management style on being honest and open, I told my employees what was going on.  It was a mistake. 

One of the worst fears is the fear of the unknown, and that is exactly what happens when employees hear their company is for sale.  In addition, it can take a long time to sell a company, so that fear can grow and grow.  My company was no different.  A public company bought my company, and it took many months to close the deal.   I knew the public company wanted my employees, but my employees seemed to focus on one thing – the unknown new owner.  I took care of them, but I probably wasn’t going to be around much longer – and most certainly I wasn’t going to be in charge anymore.  That is frightening.  I didn’t lose any employees, but I got close and had to talk two employees into staying. 

So the general rule is, no, don’t tell your employees.  However, my opinion is not to lie to them either.  So if one should guess, come clean and pull that person aside and fire them.  No, I’m kidding.  Pull them aside and explain why it is important to keep the sale confidential.  Explain that the employees are critical to the health of the company, and the new buyer would be crazy to fire them (unless that isn’t true).  Explain that business sales fail to go through for many reasons, and it would not be prudent to worry everyone for no reason.  Explain that having word of a sale get out could even cause harm to the company and the employees.

Obviously this is a general rule.  You may want to tell a seasoned, trusted employee.  You may be ready to retire, lost your energy years ago and know that the selling the company now would be good news to the employees. 

So when do you tell them?  I recommend shortly before the sale is closed, or if there is still some risk that it will not close, then after the close.   The first impression of the new buyer is important, so a lunch, barbecue or some event with the old and new owner together works well.  Immediately follow up the event with the new buyer sitting down individually with key employees to let them know how important they are to the company and the new owner.