What's your take on contacting ex-employees before LOI or during DD?

searcher profile

August 11, 2022

by a searcher in San Jose, CA, USA

I believe speaking to former employees is a great way to get unique insights that can be used to evaluate opportunities. What does everyone opine on contacting ex-employees before LOI or during due diligence? Is this likely to be perceived negatively by brokers or sellers, or is it fair game?

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commentor profile
Reply by a professional
from University of Southern California in North Palm Beach, FL, USA
Talk to your lawyer.

At least once, every month, I hear from an upset searcher who lost a worthwhile opportunity, either to business buyer competition or to messing up the searcher’s interactions with brokers and sellers, with respect to the employees of the potential merger or acquisition.

In some cases, the searcher’s mistakes blackball them from an entire sector. It happens when angry owners or brokers alert their peers about the searcher’s naïve or destructive behavior.

That’s why I published this podcast: https://lnkd.in/e5-C2Hb “Here's What Savvy Buyers Detect from Employees of Companies for Sale”

You’ll get the most benefit by listening to my entire podcast.

You can glean a few tips from the show notes (below the video).

https://youtu.be/fOvfLJoW8Qk
commentor profile
Reply by a searcher
from Western Michigan University in Grand Rapids, MI, USA
This is an interesting concept but I do have to agree that without the permission of the seller, this could rub them the wrong way and cause issues for the deal. I will add that a lot of business owners underestimate their employees. Even though their employees often have better insight into areas where the business can easily improve, owners don't keep those types of lines of communication with their employees. I would assume that means most former employees would have feedback on things like ways operations could be improved or how to better serve customers. That probably wouldn't hold a lot of weight in the diligence process. Unless you are buying under the assumption that the business is a well oiled machine with very little room to improve.
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