3 ways to retain A-player employees after an acquisition

Retaining mission-critical staff during and after an acquisition can make or break your success.

If your goal is to transform your acquisition into a source of passive income (with managers handling daily operations without you), nailing this step is essential.

There are three main strategies I recommend:

1. Give equity

Let’s say you have a GM (General Manager) running the day-to-day.

He’s been there for 10 years, the employees look up to him, and he’s the guy keeping the whole operation afloat.

You want to do everything possible to keep this person around.

And one of the best ways to do that is to give him equity in the company.

I actually had a student who just did this, named Karl.

He bought an auto body shop, and there were two guys there who both acted as a GM.

Karl gave them each a 5% piece of the company.

They’d never had that before, ever. So he gained their trust immediately.

And, he shifted their mindset overnight.

They work harder now because they’re each an owner, and benefit directly from growing the business.

2. Give everyone an increase in pay, and a bonus

If cash flow allows (and it should, if you did your acquisition correctly), this should be an automatic first step when you come on board.

You should also make their bonus contingent on staying for at least a year, as a vesting period.

You can also figure out different types of benefits for employees where it makes sense.

The goal here is to make sure your employees are ultimately better off for the acquisition, so that they want to work for you!

3. Give the GM phantom equity

Outside of just offering real equity, you can also give your GM what’s called phantom equity.

Basically, this means they get treated like an owner.

So if they have 5% phantom equity, that means they get 5% of the profit distributions. And when you sell, they get 5% of the sale price.

This effectively makes them real equity owners, without having to actually put them on the operating agreement or the cap table.

If you use all three of these tools, you’ll maintain the key talent you need to run your business hands-off, while also inspiring loyalty right off the bat.

Like the saying goes...

You only get one chance to make a good first impression!

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