How Do You Plan for Contingencies Post-Deal? Three Insights

Situation: A company is in the midst of due diligence for sale of the company. Chances of closing the deal are 50/50. The CEO, key staff and the Board must plan for both contingencies. How have you planned for contingencies whether a sale goes through or not?

Advice from the CEOs:

  • You have to assume that the company will be a going concern. If there’s no hope for the future, there’s no power in the present. Without hope, you can’t establish a motivating vision around which to rally the team. Whether or not the sale goes through:
    • It is essential that the owners and Board make a commitment to the key employees, if not to the long term business.
    • Absent a long term commitment to the business, customer initiatives and alliances may prove difficult, because major customers will know that an offer is on the table. They want to be sure that they can count on you for ongoing needs.
  • The Board and Leadership Team must create a strategy for moving forward.
    • Key to success will be material and financial commitments from the Board to motivate the Leadership Team to stay on-board.
    • Retention plans may include:
      • Sizeable retention bonuses to the team.
      • If an employee stock-ownership program is in the works, there must be assurance that this will be put into place.
      • Rules of engagement in the case of future due diligences that will preserve the financial interests of the team.
  • For the CEO, support of the Board is crucial. It is imperative that the CEO impress on the Board how critical their support is to both the company and their own financial and fiduciary interests. If the Board fails to make commitment to the team and company moving forward, it will be difficult to create a winning strategy.

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