In mergers and acquisitions, stakeholder engagement and management is a crucial but often underestimated factor. Besides employees and management, many other stakeholders include the works council, customers, authorities, suppliers and financiers.
All of these parties can influence the success of a transaction. Many entrepreneurs do not realize until too late how existing or new stakeholders can influence the transaction. This lack of awareness can lead to unnecessary obstacles and delays.
In this expert contribution, by way of example, we focus specifically on employee and management participation and its impact on the acquisition process. How do you ensure that the involvement of these stakeholders does not become an obstacle, but instead contributes to a successful acquisition and a sustainable cooperation with all parties for the future?
Participations and reinvestments: a potential stumbling block
In acquisitions where employees or management participate in the business, for example through certificates of shares, a stock option plan or a SAR, various interests come into play. The founder may also be asked to reinvest (in part), which has financial and strategic implications.
Stakeholders may experience uncertainty about their position and future, while the buyer strives for a smooth transfer without legal complications. A lack of clear communication and alignment can lead to resistance or even delays in the acquisition process.
Case in point: an entrepreneur wanted to sell a business to a strategic party, while some key people within the company held certificates of shares through an STAK and management had a stake.
In addition, the founder was asked to partially reinvest in the new structure. The stakeholders were not well informed about their rights and the impact of the acquisition on their participation, which led to unrest, legal questions and a delayed process.
Awareness and prevention: how to act?
What could have been done differently here? Three lessons we draw from these and other processes:
- Early stakeholder identification - From the start, map all stakeholders and assess their rights and expectations. In equity investments and reinvestments, it is essential to understand the legal and tax frameworks in place, and how they relate to the acquisition.
- Clear and structured communication - Inform all stakeholders in a timely manner about the impact of the acquisition on their position. Avoid surprises by presenting a clear and honest story. This prevents speculation and resistance and instills confidence in the process.
- Practical guidance and advice - Stakeholders must not only be informed, but also guided where necessary. This can be done through information sessions, individual discussions or legal and tax advice. This prevents misunderstandings from becoming dealbreakers.
Possibly this would not immediately come to mind, but as lawyers we play an active role in this. We have insight into the rights and obligations of stakeholders. After we have mapped out the stakeholders together with our clients, we can properly analyze the role of the stakeholders and thus properly guide the process described above.
This not only ensures that the transaction goes smoothly and is completed successfully, but also lays a solid foundation for good cooperation with stakeholders in the future.
Conclusion
In acquisitions with employee and management participation or founder reinvestment, awareness of the importance of good stakeholder management is essential. By identifying stakeholders in a timely manner, communicating transparently and providing appropriate guidance, entrepreneurs can achieve a smooth transaction without unnecessary resistance or delay. Managing expectations and providing clarity not only makes the deal stronger, but also contributes to a successful future for all involved.
And let's face it: better to toast to a successful deal together than not toast to a successful outcome at all.
