“To win in the marketplace, you must first win in the workplace.” Those words of Doug Conant, business leader and former CEO of Campbell Soup Company, ring particularly true today.

The talent market was tight before the pandemic, but now we’re in a critical state. Finding employees, and keeping them, is a challenge for everyone. And if you’re selling your business, it just might be the buyer’s number one concern.

In the latest IBBA and M&A Source Market Pulse Report, a quarterly survey of M&A advisors, employee issues topped the list of buyer due diligence concerns. Employees, specifically longevity, loyalty, and work ethic, ranked ahead of other priorities like operations, revenue, and customer concentration.

When businesses don’t have enough talent to grow organically, they may turn to acquisitions instead.

But buyers know that to make that strategy work, they need to acquire a fully staffed, stable employee team and a culture of retention.

Employee issues buyers care about right now:

Turnover: Buyers are looking at turnover and retention trends. If you’re constantly in hiring mode to replace departing talent, buyers will see that as an element of risk.

Culture: People stay in a job for more than salary and benefits. Buyers want to know what it is about your workplace that makes people stay – and will it mesh with their own culture?

Training: A strong learning and development program is one way to keep people loyal and engaged. Buyers see value in companies with a culture of internal mentoring and promotion, particularly if you can show how it’s linked to employee retention.

Cross-coverage. COVID-19 shone a spotlight on the benefits of cross-training. Cross-trained employees are better able to fill in for workers who want time off, who need extra help during a busy shift, or those who are sick or quarantined and unable to come into work.

Leadership potential. If you have employees who could take on new challenges and help a buyer grow, think about how you can retain them and keep them engaged in the run-up to selling your business.

However, we do not recommend disclosing your exit plans to employees. If employees find out your business is for sale, they may look for another job rather than risk an uncertain future with a new owner.

Depending on your goals, we may be able to find a buyer who will offer equity positions to select team members. The chance to get a real ownership stake in your company could be just the incentive your top talent needs to stay.

Talk to your M&A advisor about your key employees, stay bonuses, and what kind of succession planning is right for your situation.

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For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.

I had the privilege of chatting with Bo Burlingham, former executive editor for Inc. magazine and author of several books, including Finish Big: How Great Entrepreneurs Exit Their Companies on Top.

We talked about one of the key discoveries that led to the book, namely that so many business owners were unhappy after selling their companies. It didn’t really matter how much someone got for their business – some sellers were delighted while others were depressed and miserable.

What made sellers unhappy? Burlingham spent years doing interviews to find that out. And one of the biggest issues he found is that people didn’t have a place to redirect their passion and energy.

For many entrepreneurs, the business becomes their identity. It gives them direction. Without that outlet, some former business owners become unmoored. Suddenly, their phone isn’t ringing as much. No one needs them to make hard decisions anymore, and that can be troubling for some folks.

Burlington describes these owners as “wandering the desert.” They’re searching for that new thing to get excited about, and some of them take years to find it.

You might think a little wandering sounds fine, but retiree beware! There’s actually research that shows early retirement can increase your chance of early death.

A 2019 study conducted by economists at Harvard and State University of New York found that cognitive decline accelerated when people left work. Researchers contributed it to the loss of social engagement and connection that many people find in the workplace.

And yet business owners should not delay selling. Ironically, the best time to sell is when you’re engaged and excited about your business.

Buyers pay for the future cash flow of the business, and that means you’ll get the most value when you go out on the upswing. Buyers feed off your energy, so you want to show them someone who’s really truly passionate about where their company can go.

But the kicker is, you need to be passionate about your next steps, too. It’s important to know what you’re headed for, not just what you’re leaving behind.

When an entrepreneur’s identity is wholly tied up in their business, that can be a red flag. It’s a sign they might hold on to the business too long, past the point where their leadership is the best thing for the company and its value.

That’s why we ask sellers to go through a “bucket list” exercise. Think about what you want to be remembered for. What captures your interest and enthusiasm, besides your business?

Selling your business should be the first step in your best chapter ever. You’ll have the gift of time and money – and the opportunity to do anything with it you want. The best thing for your health, your happiness, and the value of your company is to know the next chapter you want to write.

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For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.

If you work in M&A, you can take a class on how to take advantage of people. It’s true! Buyers can go through mergers and acquisitions training, at some of the most prestigious universities, learning how to pay as little as possible for a family-owned business or privately held company.

M&A transactions are complex, and it’s natural that buyers and sellers will have some competing interests. When both parties come to the table in good faith, with a commitment to finding a workable agreement, these negotiations don’t have to be overly contentious.

But when buyers are out to do their worst, negotiations can devolve into a hostile power play. Worse yet, some sellers don’t know enough to push back. They get steamrolled and taken advantage of by specialists who wake up every morning intent on getting the best possible deal for their investors, at all costs.

These buyers know what they’re doing and they’re willing to play dirty to get what they want. Here are some of the tactics they might use:

Tie you up in exclusivity

Many M&A negotiations include a no-shop clause. This is a period of exclusivity when the seller cannot solicit offers from other parties. The due diligence process is expensive for buyers, so sellers sign these agreements as an act of good faith, giving buyers some security that their investment will be worthwhile.

Typically, a no-shop clause has a near-term expiration date and are only in effect for a couple of months (45—90 days). Buyers with a lot of leverage, and those working with inexperienced sellers trying to represent themselves, will work hard to tie you up in exclusivity for as long as possible.

If they can get away with it, the no-shop clause won’t have any expiration date at all, allowing the buyer to drag their feet indefinitely. Which brings us to the next strategy…

Drag it out

The goal here is to wear the seller down. They’ll request more and more documents. They’ll find “surprise concerns” they need to discuss with their team.

They’ll tell you, “We like your company, but we’re finding some issues we need to look into more. We need you to get us X, Y, Z.” They want to amplify tension, use up your mental energy, and distract you from the real work of running your business.

Re-trading the deal

At the end of the day, the whole play is about getting you to accept a lower value. You will have entered into exclusive negotiations based on certain expectations, but they’ll “uncover” issues to rationalize a price adjustment – an adjustment they were planning on from day one.

Play on your emotions

In the book of dirty plays, this one is a doozy. Buyers will find out key occasions in your life: your spouse’s birthday, your kid’s graduation date, your anniversary. And right before the big day, they’ll find something in due diligence and call an emergency meeting.

They’ll make you think the whole deal is going to blow up if you can’t make that meeting. Again, they’re looking to get you to wave the white flag of surrender.

In every industry, there are good and bad actors. Unfortunately, the bad ones are perfectly willing to engage in psychological warfare.

The less interaction the buyer and seller will have after a sale – i.e., the less future success hinges on the seller’s continued cooperation – the less incentive a buyer has to treat the seller fairly. Unsuspecting sellers can find themselves at the losing end of a winner-take-all kind of game.

It’s like a boxing match. You’re going into the ring at 0-0 and they’re at 40-2. They’ve been playing the game for two decades. I don’t care how strong you are, you’re not going to win that fight. That’s why it’s important to have professional, specialized advisors by your side before you enter the game.

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For advice on exit planning or selling a business, contact Al Statz, CEO of Exit Strategies Group, Inc., at alstatz@exitstrategiesgroup.com. Exit Strategies Group is a partner in the Cornerstone International Alliance.