Treating the employees in a transaction

October 11, 2024

by a professional from Northwestern University - Kellogg School of Management in Southborough, MA, USA

When I sold my business, over a third of the proceeds went to the non-owner employees.

I am facing a deal now where the owners also want to treat the employees in the transaction and make sure that they are taken care of.

Anyone have any creative ways they've treated workers in a transaction? Annuities? Etc?

Thanks!

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Reply by an intermediary
from Southern Methodist University in Fort Lauderdale, FL, USA

There are a number of investment and insurance vehicles available that can be considered here. What you choose should fit the circumstances but under only rare circumstances should these benefits be conveyed at closing if there is any desire for these employees to stick around after the closing. Talk to a financial advisor about deferred comp type options. If you give any of the cash benefit at closing, I would make it a smaller amount of the overall. You want them sticking arounda and motivated to do so. Do not however stretch the timeline out too long, then it might seem unachievable. 2 years max in most cases. Good luck.

Reply by a professional
from York University in Toronto, ON, Canada

I've seen good-sized bonuses to employees on closing + even bigger bonuses 1 year later provided they're still with the company. That incentivizes people to stay on through the transition period and not just get a chunk of cash and look elsewhere.

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