The first week of warm weather in Michigan has everyone walking with a little more pep in their step.
We are definitely feeling some uncertainty in the marketplace. A new (repeat) President who is making extensive changes in the US, aggressive changes to international trade policy, and sweeping changes to US spending has left many wondering what is next, as has been shown through the lack of confidence in the US stock market in recent weeks.
Some of these same sentiments can be felt in the transaction world. We have seen a reawakening of the private equity community who have been aggressively seeking quality opportunities. Their confidence in the economy appears strong as they continue to visit our office, reach out via phone and email, and closely review opportunities when presented. We have been consistently hearing from institutional buyers that the quality of deal flow is leaving something to be desired on a national level, but strong opportunities move quickly. We will be very busy on the buyside in 2025. There is money to be put to work, but it is disciplined!
The seller market has been less robust than most expected post-election cycle. Sentiments were high immediately following the election but cooled into the holiday season. Tariff uncertainty and inflation fears appear to be affecting the seller mindset in the early part of 2025 but sellers are seeking information on what their companies are worth. We continue to have conversations with business owners, providing advice on market trends and helping them prepare for their exit. The sellers we are taking to market are receiving significant interest and we expect to have another closing at the end of the month.
Business owners are increasingly seeking funding for their businesses. We continue to work with business owners seeking traditional and nontraditional growth funding, acquisition financing, and have seen an uptick in somewhat distressed situations. Funding for real estate transactions is at a premium. While most lenders welcome the opportunity to review owner occupied properties, anything in the investment real estate or non-owner-occupied space garners significant scrutiny. Most banks have little space in the IRE portfolio leaving a need in the marketplace. Rates have also hindered many development projects that were waiting for development costs to drop. Many of those borrowers appear ready to move forward at this point, regardless of cost.
In this month's newsletter, we emphasize the critical role employees play in a business owner's decision to sell. Far from being mere contributors to daily operations, employees are integral to the company's overall value and its capacity for a seamless transition to a new ownership group. A comprehensive understanding of employee dynamics and talent retention strategies is essential during the due diligence process.
Feel free to reach out to us at any time to talk about this article or to discuss a potential transaction. We look forward to hearing from you.
Current Market Rates Prime Rate - 7.50% Prime Rate 1 yr. Ago - 8.50% Secured Overnight Financing Rate (SOFR) - 4.32% The Role of Employees in a Sale When a business owner decides to sell, the due diligence process is hyper focused on the financial performance of the business, legal aspects, and negotiations between potential buyers and sellers. However, one critical aspect that can make or break the success of a sale is the role of the employees. Employees are not just contributors to daily operations; they are integral to the company’s value and its ability to transition smoothly to new ownership. This article explores the role employees play in a sale, the timing of their involvement, and the potential challenges and opportunities that arise during this process. Key Players in the Sale Process Certain employees often play pivotal roles in the sale process due to their positions and responsibilities within the company. These key players typically include:
Depending on the sale process, these individuals should not only be aware of the sale but may also actively contribute to shaping its success. Their input can help prospective buyers understand the business’ inner workings and ensure a smooth transition. Timing: When Should Employees Be Informed? One of the most delicate aspects of involving employees in a sale is determining when to inform them. Telling employees too early can create unnecessary anxiety about job security, company stability, or management changes. On the other hand, waiting too long can lead to feelings of exclusion or mistrust among staff, particularly those who are integral to operations. A balanced approach is often best. Key personnel who play critical roles in financial areas, operational roles, or managing customer relationships may need to be informed early, sometimes under confidentiality agreements. For other employees, disclosure should occur once there is greater certainty about the sales' direction and terms. This tiered approach fosters trust while minimizing disruptions. Employee Concerns During a Sale The announcement of a sale can trigger various concerns among employees that need to be managed carefully:
Addressing these concerns through clear communication and reassurance is essential for maintaining morale and ensuring employee buy-in during the transition. Breaking Down Employee Roles in a Sale Each employee’s role during a sale depends on their position and expertise. Here’s how some key roles contribute:
In many cases, retaining key employees post-closing becomes part of the buyer’s strategy for ensuring long-term success. Employment agreements and/or retention bonuses may be negotiated as part of the deal. Additional Considerations Beyond these core aspects, there are other factors worth noting:
Conclusion Employees are more than just participants in daily operations—they are invested in the future of the company and their buy-in significantly impacts the outcome of a business sale. By identifying key players early on, communicating effectively, addressing concerns proactively, and defining clear roles for staff during the transition, business owners can create an environment where employees feel valued and supported throughout this critical period. A well-executed strategy not only preserves employee morale but also enhances buyer confidence—ultimately contributing to a successful sale. |
We welcome discussion and commentary on this or any of our Newsletter articles. If you would like to discuss our services in more detail or to discuss the content in today's newsletter, please contact us to learn more about how we can assist your company or client. Below are the direct phone numbers and emails for a Mid-States team member who would love to connect. |