Will Private Equity Gut Your Team? Ending the Day One Layoff Myth

**Brandon Blewett** (0:01)
The fear that everyone is going to get axed on day one is really just a myth in their heads. We're typically working with businesses where they're very lean, and for us, the people are the ones putting pavement into the ground. I'm not going to tell them how to put the concrete in the ground. We just want to make them smarter about the work they're doing and the returns they're getting on that work. The only times that I've been asked to let someone go is when a seller has a relative that's maybe not performing. Hey, we came in with a guillotine and the person's gone. I always get this sense that people think that when we show up, it's like I'm Darth Vader and the Imperial March is playing in the background as we're driving out there.

**Jacob Oros** (0:43)
Welcome to M&A Talk, the number one podcast on selling a business brought to you by Morgan & Westfield, a boutique M&A firm specializing in the sale of small to mid-sized companies.
I'm your host and president of Morgan & Westfield, Jacob Oros. If you're considering selling your business and you'd like to work with me throughout the process, you can schedule a free consultation at morganandwestfield.com. Or if you'd like my team and I to perform a valuation of your company for a one-time fee of $1,500, visit morganandwestfield.com or see the link in the show notes. Today, we're going to talk with Brandon Blewett. He's the Head of Corporate Development at Pave America. Pave America is a billion-dollar P.E.-backed paving company. We're going to talk about life after the sale, if you sell your company to a private equity firm. Not just life for you, but also life for your employees. A lot of times, obviously, there's a concern with your employees and others if you're selling your company to PE firm, and that's exactly what we're going to talk about today. Brandon, welcome back to the show.

**Brandon Blewett** (1:50)
Thanks for having me, great to be back.

**Jacob Oros** (1:51)
So PE deal, now what? That's a concern. Everybody's seen the movies in the 80s, the articles, blah, blah, blah, blah, blah, worried about selling to the PE firm and then the employees get worried. What's the bottom line here?

**Brandon Blewett** (2:05)
In our industry and in our particular roll up, we're in hyper growth mode. So the fear that everyone is going to get axed on day one is really just a myth in their heads. We're typically working with businesses where they're very lean and for us, the people are the ones putting pavement into the ground. So they're the revenue generator. So I need them. So their jobs are probably more protected than even mine is.

**Jacob Oros** (2:30)
Where does that come from? Is it the stories probably not as much recently, but back in the day when PE firms would come in and buy a company that was being mismanaged and one of the ways to turn it around was to produce to staff. Do you think that's primarily where it came from?

**Brandon Blewett** (2:47)
I think it's that and you still hear stories. If you go upstream, there's PE firms that have funds where they can go out and buy these multi-billion dollar businesses. You are going to have cost synergies when you get to a certain level. But I'd say the vast majority of PE roll ups, you're looking for growth. So I think there is still some element of that, but it's definitely not the vast majority of PE deals that, at least that I see on a regular basis.

**Jacob Oros** (3:15)
Under what circumstances would you or might you cut some stuff?

**Brandon Blewett** (3:20)
Yeah, I think it's where you have corporate function overlap, right? If you have-

**Jacob Oros** (3:25)
Legal, HR.

**Brandon Blewett** (3:26)
Correct. Finance and accounting, things that you can pull into shared services, those would be areas where there might be overlap.

**Jacob Oros** (3:32)
How would you address that? Would you, with the owner, would you say, okay, let's give those people some severance, let's help them? How would you address that?

**Brandon Blewett** (3:40)
I think there's a couple ways. If you are going to have that overlap, I think understanding very early on with the seller and mapping out a game plan of not only the things that you just outlined, the severance, if there's any type of retention agreement to get the institutional knowledge out of that particular person, but also the game plan for the soft touch, because what you don't want to do is strike panic and fear that this is going to be something that's massive and it's going to cut deeper because then what could happen is people start leaving in anticipation and that can also put you in a bit of a bind.