Close to the Vest: What and When to Share M&A Details with Your Team

Mergers and acquisitions (M&A) transactions demand rigorous planning, careful strategy, and strict confidentiality. The stakes are high. And no matter how complex or simple a deal, it’s challenging to keep things completely under wraps. However, a premature announcement to team members about an impending acquisition or merger can bring unintended consequences, ranging from internal disruption to possible jeopardization of the entire deal.

As a business owner, you may often feel like you’re keeping a secret from your employees.  And, for those owners who value transparency with their team, this can feel uncomfortable.  Likewise, a buyer may, as part of their diligence or desire to transition smoothly, pressure an owner to meet team members early(ier) in the process.

The Risks of Premature Communication

When employees become aware of an acquisition before the final stages, it often sparks a whirlwind of emotions and speculation. This uncertainty can culminate in reduced productivity, higher staff turnover, and lowered morale. Employees can begin to wonder about their job security, whether they’re going to get along with the new ownership, etc.  Essentially, their status quo may soon cease to exist. 

Given these concerns, it’s wise to defer the announcement until the acquisition is closed, with all paperwork finalized and money in the bank- the deal is not done until that moment.  If circumstances demand an earlier announcement, it’s crucial to approach the matter delicately to mitigate potential pitfalls.  For example, there should be a binding agreement in place and certain closing conditions of the buyer should be waived (so the buyer can’t back out for, say, diligence reasons).  

Best Practices in M&A Communication

    • Disclosure should be on a “need to know” basis, when they need to know.  
      • Different people involved with the organization will have a need to know about the transaction.  Generally speaking, the board of directors, shareholders, and executive officers are typically the first to know about the transaction.  It’s important that, once they know, that they are also informed of the importance of keeping the transaction confidential.  
      • Often, principals will need to get certain key employees involved in the diligence process.  For example, it’s quite common for key employees in the financial division of the company to need to be involved in diligence.  Buyers will ask for all sorts of financial information and reports and, often, the principals or officers will need assistance to respond to the mountain of diligence requests that invariably come in during the deal process.  
      • Other key employees (e.g., top salespeople, key operations team members, and special technicians) may have a need to know before closing.  It’s not uncommon for a buyer to want to meet these key employees prior to closing (as part of their diligence) to understand whether these employees are likely to remain engaged after closing and what it will take to keep these parties incentivized through, at least a transition.
  • Save the mass communication to employees until after the transaction has closed
      • Telling parties who don’t have a need to know early is bringing risk to the transaction.  Until the transaction is closed, you don’t have a deal.  Unfortunately, we have seen our fair share of deals get to the “1 yard line” and, for a multitude of reasons, the transactions didn’t close.  It’s absolutely heart-breaking to see a seller make it that far in the process to not close.  But, could you imagine the damage control that you might face had you told all of your employees about the pending transaction?  At best, it will be a cue to your employees that you plan to exit the business soon, which may affect their desire to stay. 
  • Develop a Post-Closing Plan
      • There will be a lot to do in connection with the transaction.  Often, one of the things that falls by the wayside during these transactions is how to address employee concerns.  The principals will be thrilled about the transaction and will tout to their team why this was good.  But, the plan needs to get more granular than that.  As mentioned above, a normal employee will take this news of a transaction and immediately begin to think about the effects on them – will they still have a job?  Will they like the new ownership?  How will things change? It behooves owners to put themselves in their employees’ shoes prior to delivering that announcement and trying to anticipate some of those questions.  Perhaps, for example, you can deliver a list of anticipated questions and answers for each class or division of employees.

How To Handle Premature Disclosures 

For those finding themselves in a situation where premature disclosure has occurred (either by intention or by accident), it’s essential to act swiftly. Leadership should emphasize the need for discretion, ensure effective communication strategies, and continually monitor for any external leaks.  If an acquisition’s details have been disclosed prematurely, consider the following damage control steps:

– Reinforce the significance of confidentiality until the completion of the deal.

– Craft a comprehensive communication strategy for interactions with team members.

– Emphasize honesty in all discussions while addressing concerns head-on.

– Keep a vigilant eye out for leaks or unfounded rumors and tackle them without delay.

Taking the Next Steps with Confidence

While mergers and acquisitions are pivotal moments in a business’s journey, ensuring the smooth flow of information can determine the success of the transition. If you face challenges with M&A communication or need guidance on best practices, schedule a consultation with our skilled team. Doida Crow Legal’s approach—thorough, precise, and aggressive—caters specifically to high-stakes situations, with solutions tailored to unique challenges. We’re here to help businesses grow, finance, and navigate critical milestones. Schedule a consultation today by calling (720) 306-1001 and ensure your M&A journey is navigated with precision and clarity.

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