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5 steps to making private equity palatable to your people

Keeping employee engagement high throughout a private equity sale process and beyond is critical for your business’ health. Catrin Lewis is Subject Specialist for Employee Engagement and Internal Communications in our Growth Team and veteran of two private equity deals. Here she shares her highly effective five-step change management fundamentals.

Adapt to cope or adapt to win? Your answer to this question will define how you communicate critical change in your business. Like being bought by a private equity firm. 

At Reward Gateway, we’ve been through two private equity investor change processes and we’re about to head into a third. Each time we’ve adopted an ‘adapt to win’ change management strategy. Instead of hiding what’s happening and announcing our new investor after the fact, we take our employees on the same journey as our leaders. 

By walking in-step with our management team, our people know what’s happening and why and what’s in it for them. And they feel more connected to the business, our new investor and one another than ever before. 

Step 1 – inform your people about what’s happening and why

Many businesses become so focused on providing the information needed for the sale process that they forget – or decide not – to tell their employees what’s happening. Sending an all-staff email after the deal is done is often the first employees will know of the investment.

Although this tactic means employees remain focused on serving your customers, I believe it represents a missed opportunity. An opportunity to inform, educate, inspire, connect and entertain your people.  

At Reward Gateway, our employees are shareholders in the business. So we always want to be as open with them as we would be with an external shareholder. 

For your people to understand the decisions you make around private equity and come to the same conclusions, they need the same information you have. 

A private equity sale is a change management programme which needs to be managed over time. So this insight can’t be communicated all at once. As a business leader, you’ll know about a year in advance you’re going to change investor. Giving you plenty of scope to prepare employees for the adjustment. 

By taking an open and honest approach to communication, your employees will know you’ve got nothing to hide. Making them open to embracing change. The opposite approach – keeping all your cards close to your chest – will create a void. One that’s almost always filled with fear in the absence of information. 

At Reward Gateway, as the business begins to prepare for a new investor, we begin our employee communication change plan. Some people will be early adopters, open to and rapidly accepting the idea of a new investor. Others will be late-stage adopters and will need more information and support. 

By giving people a year to come to terms with the sale, those who don’t like the idea of working for someone else can look for a job elsewhere. This spreads out any turnover over the year. Which makes it easier for your recruitment team to manage the interviewing, hiring and onboarding of new talent into the business.

Show your people how much your leadership team cares

“We’ve just decided, after spending a bit more time with our potential investor, that the team they had on the deal didn’t have as good a connection with us culturally as we wanted. So we now have three bidders left.”

So said Reward Gateway’s Founder and then CEO, Glenn Elliott, at the time of our last investment deal in the fly-on-the-wall documentary film we created. 

This film shared the entire change of ownership process with our employees. Our people got to engage with the whole leadership team. They were in the boardroom with Glenn when he met potential investors. And in the hotel room when the final bids came in. 

Employees could see that, as the leadership team received the bids, their reactions were real, raw and in the moment. Comments like this one from Richard Hurd-Wood, former Chief Product Officer, showed that cultural fit and behaviour were extremely important to the leadership team:

“To come back with queries when we’ve answered literally hundreds of questions from all the sponsors over the past few weeks is really surprising. Would we do it ourselves if we were out pitching for business? No way.” 

Including your employees in the crucial moments of the investment process and allowing them to hear your leaders’ views will show that you have the business’ and employees’ best interests at heart. 

Supporting your people through change

Of course, not every employee finds change exciting. Some of our employees simply found it frightening. Others had pinned their hopes of buying a home on a brilliant sale valuation. And they were stressed about the outcome. 

Since our first private equity deal, the wellbeing market has developed significantly and we’ve invested heavily in this area. Today, we have a better employee assistance programme. All our employees have a wellbeing coach and wellbeing budget and we provide financial education. 

This offering makes it much easier for us to continually signpost support during the change process. Helping our employees in this way is good for them and it’s good for business too. Our people find it easier to remain focused, inspired and engaged so they can continue to deliver the good work our business is known for.

Step 2 – educate your employees about private equity and business

Effectively positioning a new investor is about alignment. Start by ensuring employees’ understand where the business is headed next. Then explain how the right private equity firm will support your company to get there. This sounds simple. But it only works well if your employees understand how private equity, business and the role of the investor works. 

There are several opportunities to do this:

  • Onboarding – we make being backed by private equity seem like the normal part of business that it is. New hires learn:
    • What private equity is and how it works 
    • That we’re on a four-to-five-year cycle at the end of which time the company will sell or change investor
    • What’s in it for them financially – how the employee share scheme works. Or, if your business doesn’t operate a share scheme, this could be information about any other performance-related pay scheme
  • Training – financial understanding is generally low so we fill in this knowledge gap by:
    • Being open about our finances and business performance
    • Educating employees on EBITDA and why it’s important to a PE investor
  • Communications – the project is branded so it’s recognisable and we include it in every quarterly update

This level of understanding about our business has helped us do more than explain private equity to our people. It also means that our Chief Financial Officer has a shared language she can use to talk to our employees. For example, explaining the true impact of purchasing and its influence on the business’ sale price. Financial judgements can also be made with the benefit of context. Let’s say that the business is going to sell for £30m. Suddenly, cutting every cost by scrimping and saving on investments that could boost the value of the business – like employee engagement programmes – seems counterproductive.  

Make private equity about more than money

Many employees worry that a new investor will have a negative impact on the company’s culture. Or that the new buyer is just in it for quick money and will be focussed on cost cutting or other short-term thinking. As a leader, you get to meet the different firms. And, as a result, you develop a sense of who you’re dealing with, who you could be working with and whether they’re the right fit for your business. 

Extending the same insight to your employees is a great way to calm any fears. We did this by having one of our team act as a roving reporter at our all-staff event. She talked to a number of different private equity companies who were interested in Reward Gateway, and revealed that these were normal people with families who want to do a good job. Just like our employees. 

Step 3 – inspire your employees by telling them what’s in it for them

One of our company values is ‘own it’. It’s about standing up and taking ownership. And it represents the responsibilities our employees take on in a company with few rules and minimal processes. This value also encourages and celebrates a sense of empowerment, which helps people feel more involved and influential.

We connected this value to our employee share programme. And we tell our people that, like our leadership team, they also own part of the business – 5% in fact. This is all about inspiring and rewarding everyone’s efforts by sharing in the financial success of the organisation. 

The first time we sold to a private equity firm, the payout for all our staff in the share programme was significant. Some people cleared off debts or even put down deposits for houses. This was a brilliant way to answer the ‘what’s in it for me?’ question at the back of every employee’s mind. And it gave many employees a level of financial security they’d not experienced before.

This level of employee reward is aspirational for many firms. But there’s plenty you can do that doesn’t involve cold hard cash. 

Beyond money

Money is a short-term motivator for some people at certain times. But on a day-to-day basis, people need other forms of inspiration. And this comes back to inspiring your employees about the purpose or the ‘why’ behind your business. 

A key part of the way we inspire our people at Reward Gateway is to continuously share the information our leaders know. Like the company’s strategic direction and new product launches. Or our aim to become a household name for small businesses across the country. 

Having exciting new goals to work towards is as inspiring for your employees as it is for your leadership team. So put your plans up in lights.

You also need to explain what’s in your strategic direction for your people. For us, this meant increasing our headcount to 500 employees, growing the business globally and creating additional exciting career opportunities around the world. 

Another benefit of being open about the investment process is that you can inspire your people using comments from interested companies. When we changed investor in 2015, the investment firms reinforced their view of our business as a successful, global company. They identified how Reward Gateway was doing some incredibly unique and valuable work. And they always talked about how you just don’t get a culture like the one we’d built. 

Having that external verification from a company with businesses all over the world is a really good way to validate what you’ve been telling your employees. It inspires them and that inspiration will flow out to your customers too.

Step 4 – connect your people to each other and your potential investors

There are two sides to this step. One is connecting your employees to one another. The other is connecting your investor with your people. 

Connecting your employees and your potential investors

Creating opportunities and shared moments for your employees and your potential investor is an opportunity that’s too good to miss. And this is exactly what we did at Reward Gateway with the creation of our big, orange coffee table book. Named “The Alternative IM”, it: 

  • Explored who our clients were and the products we provided
  • Covered our internal events – a cornerstone of the employee engagement strategy
  • Explained every employee’s role in the business
  • Dedicated an entire page to a number of key employees
  • Included a professional photo of each person, often showing them “in action” with customers or at events or conferences
  • Was sent to each potential investor and every employee

The book not only explained the company’s strategy and culture to investors, but it connected employees and helped them better understand each other’s roles too.

Remember – this isn’t about you

Some people might think this level of excitement among employees is too distracting. That it prevents them from focusing on the customer. Or that it’s somehow a bit too showy. But I disagree. This isn’t about you or your business, but your people. It’s to do with creating a shared psychology among your tribe and taking everybody down the path with you. 

I think it’s brilliant for employees to have something to look forward to. I also think it’s important to give your people a sense that they’re part of something bigger. In this case, the success of your business. By making them feel the importance of their role and giving them a special experience you’ll truly inspire your people.

Continuing the connection

Once the sale is complete, you need to ensure your investor remains visible. That they become a friend to the company rather than a shadowy figure that’s perceived to be pulling the strings from above.

When our sale went through, we interviewed our new investors and introduced them to the company via a video. We asked them questions like: “why have you invested in us, what are you expecting from us and what’s the opportunity for you?” This continued the transparency of our communications and made sure our people could see our investors were aligned with our business.

Even now, when our investor comes to meet our current CEO the managers are also invited for breakfast. This way, we get to provide our views about how the business is going. Our investor also joins our all-hands meetings if there’s something we need him to comment on. Which gives our employees the chance to hear him and ask questions too.  

Step 5 – entertain your employees to engage their interest

Creating the right messaging is one part of communicating effectively with your employees. The other part is landing those messages. 

At Reward Gateway, this meant ditching dull management speak and being entertaining. When our regular leadership communications went out, part of my role in internal communications was to continue embedding the messaging, sometimes by making it more fun and entertaining, often with the employees telling the story themselves. This introduced new tones of voice, created a buzz and showed that our people were advocates for the change. We used blogs, social media and a fortnightly in-house TV programme to share the story. 

Make a day and a night of it

You’ll only sell your business once every four to five years, so why not celebrate in style? The night before we announced our change of investor, I decorated our office with bunting. We made sure every employee had a bottle of champagne. And we converted our employee engagement platform so it was all gold and sparkling. 

We also had a big screen set up in our office and we asked everyone to gather in front of it as they arrived for work. Then we played the documentary of the whole journey. It used music to keep the pace and create emotion and slowed right down at the end when our Founder Glenn, thanked every single person for making the sale possible. We posted the same video update online so our remote employees could watch it as well. 

Then we cracked open the champagne and, as soon as the share letters were uploaded to our engagement platform, everyone scrambled to open them. These letters thanked everyone for their hard work and significant contribution in realising a huge company milestone and set out the details of their personal share valuation. We had a big celebration in the office and went on to a party in the evening which was all decked out in gold. It was a really fun day and night to mark the result of everyone’s hard work.

Business success relies on winning hearts and minds

This five-step plan ensured our private equity sale was open, transparent and highly engaging. Because our employees had been taken on the journey our private equity sale was viewed as a really positive step for the company and our people. 

To understand the impact of our change management programme, we carried out a before and after survey. The results were pretty amazing:

  • 93% said they understood the decisions the leadership team made throughout the process
  • 93% said they felt informed about what was happening overall
  • 95% of employees that they felt more connected to and understood the business better at the end of the process than when we started it

These results prove that our communications did more than make private equity palatable to our people – they also had a lasting impact on our company. Because our employees understand our business better than ever, we’re in a strong position to deliver our mission. Which means we’ll be even more attractive to another investor when the time’s right for our next sale.

Getting the most out of your private equity sale relies on a truly effective employee engagement strategy. You could copy other businesses’ post-sale, all-employee email tactics and settle for the value written on your sale cheque. Or you could break the mould, follow some or all of the tips in this article and add more value to your business both in the short and long-term. 

Of course, being this open and honest with your people takes time and effort. But the investment you make now will make your private equity sale not only palatable to your people but decidedly delicious. 


Picture of Catrin Lewis

Catrin Lewis

Catrin Lewis is Tenzing’s Employee Engagement and Internal Comms Specialist. She runs our network and monthly meet-up for portfolio HR leaders and has advised many of our businesses on internal communications strategy, workplace design and employee engagement. She is a published author, regular conference speaker, and Head of Global Engagement & Comms at the HR Tech business, Reward Gateway, which she has seen through three periods of PE ownership.
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