Retaining key members of management during an exit process is critical for maintaining operational continuity, maximizing valuation, and ensuring the successful close of a transaction. We know that time can kill deals, so how can you manage that risk and keep your management team focused, motivated, and engaged until the end?

Promote Transparency and Streamline Due Diligence

Maintain open communication with your management team. Remove uncertainty by clearly defining each person’s role and future within the company. Set clear expectations on deal timelines, anticipated workloads, and the flood of diligence requests. If possible, proactively populate your data room with essential information to minimize follow-up demands from prospective buyers. Lean on advisors, such as bankers and legal counsel, to help manage data requests, and don’t hesitate to push back on those that aren’t essential.

Clearly-Define Incentive Compensation

Establish all incentive and bonus compensation structures before the sale process begins. This includes equity incentives, transaction bonuses, retention payouts, and non-compete terms. Delaying these negotiations until late in the process gives leverage to both your management team and the buyer, often dragging out negotiations and complicating the deal. Proper upfront incentives ensure everyone is focused on reaching the finish line. As the likely purchase price becomes clear, review individual incentives to confirm continued alignment. If the sale price is less than anticipated, consider additional exit or retention bonuses to maintain motivation. Reward exceptional contributions during the process with one-time sales bonuses as appropriate. While it may seem helpful to offer severance agreements alongside non-competes, buyers generally prefer retention bonuses. Severance can unintentionally send the wrong message, incentivizing employees to disengage. Retention bonuses, instead, encourage commitment and continuity, qualities that buyers value far more post-transaction.

Build the Right Team for the Deal

Build a deal team with the right management members and sufficient support. While it can be tempting to keep the team small (to contain sensitive information), overloading key employees risks both operational disruption and deal fatigue. Key players should have the bandwidth and resources to handle management presentations, diligence responses, and regular job duties. Adequate resources help prevent burnout and ensure buyers see a stable, adaptable operation during the transition.

In Summary

Before initiating the sales process:

• Finalize incentive agreements with key employees.
• Organize and populate your data room.
• Engage advisors to front-load as much preparatory work as possible, minimizing last-minute fire drills as the process unfolds.

Focusing on management retention goes beyond simply holding the team together during an exit; it demonstrates to prospective buyers that the business is resilient, well-organized, and primed for a seamless transition, ultimately supporting a smoother transaction and better long-term outcomes.

This article was published in Crain’s Cleveland Business on Jan. 12.