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Sales & Mergers | When to Distrust Your Employers

On Behalf of | Mar 1, 2021 | When to Distrust Your Employer

The Sirens are almost always at work when the management of your company is in transition. When companies are in the process of being sold and the management and control of companies is being negotiated, false promises to employees are common. Companies in the negotiation process tend to be very nervous about employees abandoning ship because, generally, the company’s value is based on it being sold as a going concern with a full complement of experienced employees.

In fact, once the company is sold, the new owner will probably make significant changes to management within the first year. But — and this is crucial — the new owner does not want employees deciding this for themselves. In order to get top value for the business, the prior owner needs to prevent existing managers from bolting prematurely. You see the problem.

Owners and corporate officers are usually protected by contractual terms negotiated for them during the sale of the business, but everyone else is usually unprotected. It is common for companies involved to try to reassure employees with general statements like the following:

  • The value of this company is its employees. You have nothing to worry about;
  • We are not planning any changes in management;
  • We do not want to make any changes;
  • We want to work together to make this company grow.

Don’t believe these statements. Remember, most companies are purchased by owners who believe they can significantly increase profits by managing the company in a different way. Moreover, as a result of the high price paid to the old owners in the sale, the company often has significant new debt that is not related to improving or increasing production. This debt makes it much more difficult for the company to have a healthy balance sheet. As a result, the new owner is likely to be less interested in long-term goals and in product quality. Short-term financial goals may be paramount. This is even truer where the new owner overpaid for the Company.

Immediately following a merger or sale, employees will often see the following changes:

  • The workforce may be significantly reduced;
  • Long-term older employees with good benefits are particularly likely to be reduced. Age discrimination is particularly rampant after a corporate sale or merger. New management, once they are sufficiently familiar with the operation of the company (generally within the first year), will often terminate employees with old loyalties, traditional ways of operating, and expensive benefits;
  • Existing employees may be required to do more work;
  • Salaries may be frozen and benefits eroded;
  • Younger employees may be hired;
  • Managers from the acquired company may be replaced with employees from the new parent company;
  • Employees may be asked to focus on short term financial and budget goals;
  • Managers who are product quality oriented may be frustrated by lack of corporate support and resources.

If the company where you work is being sold or is under consideration for sale, here are some things to consider:

  • If it’s not in writing, don’t believe it. If you receive any promises that are going to rely on, confirm them in writing;
  • Negotiate for job security before or immediately after the company has been sold and you still have leverage because new management has not yet taken over;
  • Be realistic. Aggressively check out the job market for other possibilities.