The subject has been beaten to death in the press, the public forums, on Bigot24, around the braai and in many other discussions. We cannot easily change the labour laws in South Africa; it all goes to elements of the constitution: When it comes to dismissing an employee, employers have their work cut out for them.
So we all know how difficult it is to get rid of that bad apple in your organisation without going to the CCMA for a detailed probe into your business, other employees, the subject employee’s sainthood and finally, your bank account.
How then is it that a bad apple who leaves your business of his own accord can make a life changing difference to your business, its value and your possible retirement, without going anywhere near the CCMA?
A staff member who unexpectedly resigns can have a very detrimental effect on any business, but what happens when that employee teams up with a potential buyer of a business and threatens to resign if a deal is not struck with the potential buyer, on terms not in your favour? It doesn’t have to be as blatant as I have outlined it here.
- The negotiations progress well
- The purchaser enquires about the importance of each of your employees
- He notes that there is a linchpin manager or supervisor, and expresses a desire to meet with the person “to make sure we can work together”
- First they meet in your office, with you present
- Some more negotiations
- At some stage the linchpin and the purchaser get together outside the work environment to work on the business plan
- An agreement of sale is signed which includes some “conditions precedent” (CPs). (You may know them better as suspensive conditions – if they are not satisfied by an agreed date, the agreement lapses)
- The conditions usually include things like the ability to raise finance, reaching agreement with the landlord on the lease, the successful outcome of a due diligence, and so on
- Curiously, the purchaser asks for another CP: Reaching agreement with the linchpin on his employment contract
- Soon after signing, the linchpin has a slight change of attitude, and things get nervous around your dinner table.
Perhaps you will never know because the threat comes about without you knowing that there is some collusion in the air. Perhaps there is no collusion. Perhaps he simply does not like the purchaser. Perhaps he was looking for a career change anyway.
Whichever way you slice it or dice it, you have a life changing threat on your hands.
And people ask us why we place so much importance on the exposure to staff members when we do our valuations for small and medium size businesses…
I was fascinated by this article as I have recently had the misfortune of being in this very position as the buyer.
The negotiations were final bar a few details and suddenly we had a major curve ball from a linchpin.
The deal went ahead but only after the linchpin was given a substantial settlement. Until then I had not realised how easily one can be held to ransom.