Who gets left behind after a sale?
This is a question that you should pay attention to as you go to sell your company or buy one. During many of the deals I was a part of at CMGI, I was the one that was brought in to assess management and render an opinion as to who would stay and who would not. I looked at many factors from who made the most money on the sale of the company to who actually did the work. I met with the “keepers” and discussed their role in the go forward company selling them on life in the post acquired company. Here are a few types of people I ran across:
The Founder: I usually never counted on a founder staying because what made them great as a founder makes them stink at being in a big or bigger company. Also it is hard and unnatural for them to let someone else run their company. – Your strategy – provide a graceful exit.
The Manager: These were the people that kept the ship running and were sometimes anxious to see the founder and their shoot from the hip style leaving. If you found someone like this it was like striking gold. This person was a real keeper. – Your strategy – beg them to stay and sell them on being the future.
The Engineer: “The” engineer who typically was the recipient of an inflated title was trouble. Thought they were great because they created the code you as the buyer were now paying BILLIONS to acquire. These people had inflated egos and inflated salary demands. They also did not want to change their perfect code. – Your strategy – beg them to stay and immediately start a transition plan to make sure their undocumented code gets documented.
Executive Team: The top level of the company should be interviewed and all of them should be kept for some period of time so that they can help with the post acquisition integration. They also will then have a 90 day working interview where you can figure out who really is necessary or vital to the company and who is not. Your strategy – try to keep them all for a time as I have seen the baby thrown out with the bath water.
Second String: The second player to each member of the Executive Team. This is where you will likely find your future leaders of the business – by future I mean within 90 days as the executive team starts bailing out. It is important to get to know these people after the deal is announced or before during diligence if you can. In many cases they will be younger and less experienced but their domain expertise can really plug some big holes if you lose members of the executive team (which you will both because you want to and because they will want to leave). Your strategy – meet with them a lot during the early stages of the transition.
Whether you are buying or selling a company you must figure out who will stay to help manage it after the founder(s) leave. It is rare that the group of founders will want to stay. Google is starting to have some success enticing the whole group of founders to stay but these are mainly very small companies where there is more upside in working for Google and receiving Google options than leaving for the next start-up.