Key-Employee Risk
How do you protect against key employees leaving after an acquisition?
One or two people carry the technical work, the top sales, or the customer relationships. No succession plan for any of them.
What to ask for
Suspecting a flag is not the same as verifying one. These are the documents and signals that turn a hunch into a decision.
- Tenure and compensation by role, with the two or three outliers explained.
- Who holds the certifications the business cannot operate without.
- Which employees customers ask for by name.
- Whether anyone has an employment agreement at all, and what it says about competing.
The question to ask the seller
“Who are the two or three people this business cannot lose, and are they staying after the sale?”
Ask it in those words. A seller who answers straight is telling you something. A seller who dances is telling you more.
The people who can leave are usually the ones who can take revenue with them. Key-employee risk and customer concentration are frequently the same risk wearing two labels.
Retention agreements signed before closing, not promised after. If someone irreplaceable has already decided to leave, cut the price to the business that remains, or walk.
Retention agreements before closing. If someone irreplaceable is leaving, cut the price or walk.
Travels with
Flags that show up together.
Screening one of these usually turns up the others. They share a cause more often than they share a coincidence.
Every deal you read gets safer.
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