What Happens to Employees in a Management Buyout

Mergers and acquisitions (M&As) play a seminal role in the world of business, especially in terms of shaping industry landscapes and competitiveness.

The total value of M&As in the UK made by foreign companies was £27.7 billion in Q2, 2021, up from just £19.4 billion during the previous quarter.

Acquisitions of several deal structures, including management buyouts. But what type of deal does this describe, and what happens to employees in this type of arrangement?

What is a Management Buyout?

A management buyout refers to a type of corporate restructuring process, which sees senior leadership and stakeholders acquiring the major stakeholding in a business from the existing owner.

Often, this will concentrate a diverse and large group of shareholders into a much smaller collection, while largely retaining the brand values and core team of employees.

However, there’s no hard and fast rule about what happens to employees during a management buyout, as this depends entirely on the machinations of the buyers and the strategic direction going forward.

How Do Employees Fare During a Management Buyout?

During the process of the acquisition and management buyout, it’s important that employees remain calm and focused on their core job roles. The reason for this is simple; as around 30% of employees are made redundant following this type of corporate restructuring.

Potential buyers can help with this by keeping them informed and updates as negotiations progress, while being open and honest about how any future restructuring will impact on staff retention plans.

Once the restructuring plans are formalised and the buyout complete, it’s important that employees are told immediately about their futures. This is particularly important if they’re being made redundant or moved into a different role, as part of the wider company restructuring process.

In the immediate aftermath of the acquisition, there may also be a period of silence that makes employees feel uncomfortable.

It’s crucial that open lines of communication are maintained during this period too, both in terms of each individual employee’s future and the likely time-frames for any changes to be enacted.

It may be particularly rewarding for the buying management and senior leadership team to meet with employees directly and answer any questions they may have. This can also help to forge strong relationships and prevent valued employees from seeking out alternative job roles.

The Last Word

Ultimately, there’s no single course for employees in the wake of a management buyout, although it’s common for some to be released or made redundant as part of a company’s corporate restructuring.

The key is for buyers to outline their plans as clearly and quickly as possible, while ensuring that they communicate regularly with employees at all levels of the business.