In the sale of a business, confidentiality is VERY important. What happens when your critical employees must be informed prior to the sale? We recommend stay bonuses. A stay bonus incentivizes key employees to cooperate and assist with your sale.
How much should the bonus be? There is no set amount – we’ve seen ranges from 20% to 100% or more of an employee’s salary. Just like the deal structure/terms are more important than the purchase price, it’s the payment terms that matter! Common allocations are 50% percent or so at closing and the remaining amount at six months or a year later. Buyers’ level of assurance that the management team will stick around increases greatly! Also, it’s a nice carrot for the employee. Thus, your company becomes more salable because you have lowered a buyer’s risk.