This year we have had several clients acquiring or selling businesses, and we thought it’s timely to revisit one of our most popular newsletter articles (which dates back a few years to 2015 but happens to still be relevant today). It takes important consideration of the ‘human’ side of buying or selling a business. We have given the article a refresh and hope you enjoy it.
You’ve taken the plunge!
You’ve decided to sell your business or acquire a new one, and there’s a seemingly endless list of things to think about… finances, assets, systems, risks and legal considerations. These are the nuts and bolts of the sale and purchase. But it’s important to also think about the “people” side of the process. What will it mean for your existing team or prospective new employees?
I have seen business acquisitions handled well, but I have also seen them handled badly. It’s the HR considerations that, if handled well, will make the transition smoother and less stressful for all involved.
Start with a clear understanding
There are no right or wrong answers, but the important thing is to act in good faith through the process. This starts with agreement between the two parties – vendor and buyer – about the staffing. Both parties should have a clear understanding of what is happening, and you may need to reference some decisions in the sale and purchase agreement.
Considerations:
- Is the buyer going to take all staff on? Or some staff, not others? Or nobody?
- If the buyer takes on some or all staff members, are they going to take them on the same terms and conditions?
- Is the buyer going to have a trial period?
- Will staff start afresh with their annual leave entitlements? This has implications for the purchase price of the business because it means the current employer will need to consider paying out any leave owing, or the buyer might pay less if leave balances are transferred.
- Is there a 6 month stand-down for bereavement and sick leave with the new owner?
- What information will the current owner disclose to the new owner about staff, keeping in mind the protection of human rights and the right to privacy? Many employment agreements will have a clause on disclosure during the sale and transfer of a business.
Keeping the rumours at bay
Planning and communication are key when you are leading up to the sale of the business. If employees don’t have the facts, or if they don’t understand the process, chances are they may imagine the worst case scenario. Think about the timing and content of the messages you want to give and keep everyone informed about what is happening – with regard to commercial sensitivity, of course.
New documentation
For the buyer it’s important to think about what documentation is required. Employment agreements don’t transfer with the employee, so they need to be written for the new employer. However, there may be some terms and conditions you need to grandparent into the new agreements. Common examples we see are long service leave, extended bereavement leave, extra annual leave and allowances, e.g. for tools, mobile phones and stockings (yes they still exist in the medical field!). Other documents that should be considered are policies and procedures, and transition plans.
Protection under legislation
There is some protection under legislation in special circumstances for specified groups of vulnerable employees, i.e. some employees have a legal right to transfer to the new owner on their existing terms and conditions of employment. If you are buying or selling a business with employees in these categories, we recommend you seek advice before signing the sales and purchase agreement: cleaning services and food catering services. There are also some specifics in legislation around redundancy and employee protection provisions – you should become familiar with your responsibilities outlined in your agreements around these aspects. Click here for a great article by Legal Vision explaining who are vulnerable employees.
Buying and selling a business is much more than just the financial transaction. Take the time to plan the human elements for a smoother transition, and if you want to have a chat give us a call on 07 823 3250 to book in a catch up.
