Title - Incentivise managers to stay with the company post-acquisition Tags - businesssystems exitstrategy stockoptions equity
To sell a company, the owner must incentivise manager’s to stay with the company after it’s sold so that the buyer is confident the business will continue to succeed after the acquisition.
One option is to give the managers equity in the form of stock options, which give managers the right to buy a specific amount of the company’s stock and subsequently profit from its success.
The major advantage of stock options is that they make employees feel like they’re invested in the company’s success which is motivational. On the other hand, stock options are complicated to set up, so they’re not the best option for very small businesses.
For small businesses, an alternative option is to put in place long-term incentive plans that reward performance and loyalty (e.g. pay an end-of-year bonus AND contribute money to a bonus fund which pays out in 3 years, thus incentivising employees to stay).
[#warrillow2011builttosell]: John Warrillow (2011): Built to Sell: Creating a Business That Can Thrive Without You, Portfolio.