For a vendor, how do you manage the motivation of the management of the company to be sold? The management plays a critical part in running the day-to-day operations and also preparing the dataroom and responses to prospective investors. However, the management are also aware that their jobs are at risk if the transaction is successful.
I think its fair to say that if Management are not given equity prior to a merger, then the organisation runs a serious risk of those managers leaving, and finding safer/better/higher-paid jobs elsewhere.
If they are not worried about their job security in a new org, that is good. However it is possible that this is their first time in this situaiton, and they may start to worry as they learn more about tit.
It is rare for management to retain motivated without the right comp package that smooths over their transition from old-new, and keeps them performing at the level required.
Depends on each person’s individual situation. I have bene on deals where certain members of management are looking to retire and their primary intent is to ensure a good handover and that employees are taken care of in a transition. In that case the motivation for them was that buyers are responsible and can bring value to the takeover. For management that wants to continue, retention packages and earnouts are normal to ensure there is some transition. Even success bonuses have been used. I’ve found that if you keep them involved in the deal and with the prospective pool of buyers, it gives them opportunity to show where they value add which is also motivating for them.
A retention plan with some equity stake in the new venture will allow the team of the acquired company to focus on the acquisition work rather than job hunting, just in case. The equity will help to drive continued dedication through the group having a stake in the new venture and having some component of their overall compensation tied to success.