Our senior leadership team is critical to our valuation, but they do not own equity. How do we structure retention agreements during our exit runway so they do not walk away when they find out we are selling the company?

Question

Tyler Smith · Accepted Answer

If your leadership team leaves during the sale process, your deal will collapse. Buyers are purchasing the future cash flow of the business, which is generated by the people running your operating system. To secure your team during the transition, you must design a structured stay-bonus program on your exit runway. Do not wait until you sign a Letter of Intent to have this conversation. Work with an experienced compensation specialist to draft a formal key-employee retention plan at least twelve to eighteen months before going to market. This plan should offer a significant financial payout, typically a percentage of their base salary or a pool tied to the final enterprise value. Structure the payout so it is split into two parts: fifty percent paid at the close of the transaction, and fifty percent paid six to twelve months post-sale, contingent on their continued employment. This aligns their financial incentives with both your successful exit and the buyer's transition goals. Frame this package as a reward for their hard work in building an institutionalized business through EOS. When key leaders know they are financially protected and have a clear seat on the post-sale Accountability Chart, they will help you drive the deal across the finish line.