One of the toughest decisions founders face is when to tell their employees about the sale of the business. The common consensus is to say nothing until the deal is signed, sealed, and delivered. But when Alan (my co-founder / father) and I sold HT2 Labs to Learning Pool, we did something different: everyone in the company knew about the potential sale before it was finalized. Sounds risky, right?
Looking back, I’d say it worked out well. The majority of our staff stayed on, and many went on to have thriving careers at Learning Pool. I’ve observed many other messaging strategies, and none of them – no matter how closely they guarded the secret – seemed to work as well as ours.
So should you take the road less traveled and go tell employees early?
Why Most Founders Keep Quiet
The inevitable part of taking someone else’s capital to fund a business is that, one day, they’ll want it back. It’s quite fashionable to want to work for a funded start-up, but anyone going into that world has to know that, eventually, the party will come to an end and an exit event of some sort will occur.
The perceived wisdom is to keep pretty quiet about an exit – revealing too much about a potential sale will create uncertainty, making your team more likely to jump ship right when you need stability.
We’d had a number of potential acquisition offers, as nearly all small businesses with some growth do. When that happened, we kept things within the boardroom. These early approaches were often tire kickers with little chance to materialise. Telling our team about every approach would would’ve only built a mixture of false hopes (for those in an equity position) and anxiety (for everyone else).
If you progress further in a potential deal, then you start to worry that disclosure could weaken your negotiating position. If your team knows you’re nearing a sale, and the deal falls apart at the last minute, you might look like you’ve lost control. A buyer could use that to pressure you into unfavourable terms. Once you’ve said it out-loud to people, you kinda feel committed to making it happen.
And, of course, perhaps one of the reasons most founders keep quiet is because the terms of an offer forbid them from saying anything. The non-disclosure aspects of Heads of Terms can be daunting and to think you’ve torpedoed a deal by breaching the non-disclosure clauses can make you very wary – and give you a good reason not to do it.
This is, as with all things in an exit situation, a part of negotiation. You won’t get the investor to change the terms of non-disclosure in a material way. But you can fill them in on your plan and give them your rationale as to why you are going with early disclosure. This is part of building your new working relationship; if you can’t work this out, will you be able to work together at all?
The Conditions Needed for Early Disclosure
I wouldn’t recommend early disclosure in every situation. A couple of key factors made it possible for us:
1. A Transparent Culture
At HT2 Labs, we had a culture of openness. Our booking numbers and P&L were literally stapled to the walls, and anyone could ask about the company’s financial situation. Our management team was trusted, not feared. Because we already operated with transparency, telling our employees about the sale wasn’t a big leap. If your culture isn’t based on trust and openness, early disclosure could cause more harm than good.
2. The Nature of the Deal
The deal with Learning Pool was all about growth. Both companies wanted the team to stay and build the business together. That’s why I could get agreement that, even if the Learning Pool team didn’t think it was a great idea, they wouldn’t call the whole thing off if we did it. If the deal had involved major layoffs, I probably wouldn’t have told people so early. However, even in a scenario with some minor redundancies, I believe being upfront is important. Losing a job is a life-changing event, and fair warning is the right thing to do.
How We Informed Our Team
So, how did we break the news? Alan was known for his “walks and talks” with employees, often using the office dogs as an excuse to get out for a stroll. He took this approach when telling the team about the sale, walking with each employee individually and explaining the situation. He told them who was potentially buying us, why we were considering the sale, and how it would affect their roles. Crucially, he also made it clear that the deal wasn’t finalized and that they should keep the information confidential.
At the time, we thought we were only a week away from closing, but in reality, it was closer to a month. Unsurprisingly, the news leaked, but the important thing is no one left the company. By the time the deal was done, we had already worked through a lot of potential issues with the Learning Pool leadership team, thanks to questions raised by our staff.
Creating a Brilliant Day One
Because we had informed the team early, we were able to do something that most companies can’t: organize a “day one” off-site event. We booked a local country castle for the entire team and flew in employees from around the world. Representatives from Learning Pool joined us, and we kicked off the day by officially announcing the deal.
The rest of the day was spent in group sessions to help everyone get to know each other and understand how the integration would work. We wrapped it up with games, dinner, and some well-deserved drinks. It set a positive tone for what was to come, and that energy carried through for months afterward.
The Aftermath: Career Growth for Those Who Stayed
Not everyone stayed, and that’s okay. A bigger company has a different vibe, and some employees chose to leave for new opportunities. But for those who stayed, the acquisition became a career accelerator. In just a few years, many went from individual contributors in a small company to senior leaders in a larger organisation. I believe that our transparency, starting with those walks, helped make that happen.
Every company is different, and early disclosure isn’t always the best move. But in our case, the culture of transparency and the nature of the deal made it possible – and beneficial – for everyone to know about the sale ahead of time.
If you trust your team and the deal is about growth rather than cuts, it might be worth ignoring the conventional wisdom and bringing your employees along for the ride. After all, they’re the ones who will help make the next chapter a success.