Let me provide some context to the stories that have come out over that last couple of days about the sale of Knight Ridder. I also have suggestions below on how current employees of the company can plan for their personal transition to the new world they are facing.

The signs are that smart, hard-nosed money managers will end up owning Knight Ridder, or at least providing the funding for someone else to buy the company. These are the folks I have described as strictly business and immune to the gnashing of teeth, pulling of hair and beating of breasts by journalists and the academic community over the violation of the public trust.

Dean Singleton flew in to San Jose on his private jet last week to meet with the Knight Ridder people. He is involved with three different private equity companies to see if they can buy the company.

There are other equity firms forming coalitions to make a deal. The Mercury News had a good summary of the equity pools cooperating in the Wednesday edition.

There is a still chance that Gannett could buy the company. Gannett is seen as the only possible buyer who could make the deal without using equity backing.

For employees, advertisers and readers the difference between Gannett, Dean Singleton and MediaNews and equity ownership is pretty slim. They are all going to demand wage and benefit cuts, operating expense cuts, increased sales results and other changes to drive margins way above where they are now.

I know there are many people inside of Knight Ridder who hope McClatchy will buy the company. They see McClatchy as a white knight (no pun intended) who will ride in to save everyone from the avarice of the Wall Street power brokers. But this is just not very likely. McClatchy met with the Knight Ridder people with no equity funders present. Without the active involvement of private equity financing it is hard to imagine McClatchy buying all of Knight Ridder.

My guess is Gary Pruitt and the folks at McClatchy are interested in the newspapers that might get spun off from the sale of Knight Ridder.

I suspect the papers Knight Ridder acquired last year from Gannett would be very interesting to McClatchy. These papers are in Boise, ID and Bellingham and Olympia, WA. They would make a very powerful cluster with the McClatchy newspapers in Tacoma and Kennewick, WA. I see this McClatchy side deal as especially likely if Gannett is the buyer. Gannett voted these newspapers off their island when they traded them to Knight Ridder for Tallahassee.

McClatchy might also want the California papers, especially at a bargain price. Contra Costa, San Jose, Monterey and San Louis Obispo would go nicely with the McClatchy Bees in the Valley.

But even if McClatchy gets a bargain price on part of Knight Ridder they will have to borrow many millions to make the deal. They will have to cut costs and increase sales at the newspapers they acquire to cover the debt service on this money. Also, their current operating margin is about 23%. They do not dare allow an acquisition to drag the margin down below where it is now.

If McClatchy gets part of Knight Ridder they will have to demand wage and benefit cuts, operating expense cuts, increased sales results and other changes to drive margins way above where they are now. Just like Singleton, Gannett and the equity buyers.

So what will all of this mean for the employees of Knight Ridder?

It will mean a time of deep, emotional distress. People will leave and new managers will take over. The wages that everyone depends on will be threatened. Benefits, policies, practices and routines will change.

There are likely to be extra difficulties at the union newspapers, especially since contracts are up in San Jose and Philadelphia this summer and in 2007 in St. Paul. At these papers there is the danger of an asset sale at some point in the process. This would essentially allow the existing contacts to be cancelled and the new owners to impose their own rules. Take it or leave it. Even without this “nuclear option” contract negotiations, with demands for give backs and new work rules, could last for months and keep everyone on edge.

But eventually the dust will settle and people will have a clear picture of what their new world is like, regardless of who owns the company they work for.

And when this happens—or maybe before—the employees of Knight Ridder will have to make a choice. Are they willing to do the same amount of work—or more—for less money and reduced benefits?

I urge those of you who are current employees of the company to give some thought to your threshold. At what point do you update your resume? Are you willing to stay in your current job for a 20% pay cut? How about 30%? Will you look for a new job when your current out-of-pocket medical expenses double, triple or go up tenfold? How will you react if there are no longer company matching payments to your 401K?

Do you stay or do you go?

If you decide to go, please do so quickly. Do not stick around and poison the atmosphere for the people around you. The world is full of good jobs. If you need someone to review your resume send it to me. I have helped about a half dozen Mercury News employees with resumes in the last couple of years. The most I have been paid is a nice lunch and in most instances I have gladly settled for a good cup of coffee. You can reach me via loualex@sbcglobal.net

But if you decide to stay please understand what you are doing. You are signing on to a new mission with a new employer. You have agreed to work for a new company and to help them increase profits. You have agreed to accept lower wages, diminished benefits and new operating procedures.

You have, in my opinion, given up most of your right to complain.

I used to think about this in terms of my covenant with the company. I made a conscious decision to renew this covenant each year. When I was hired I accepted a covenant built around specified wages and benefits. I made my best guess about how much bull-hooey the place would generate and how much I was able to tolerate. I accepted the job and signed on to the mission.

During my 21 years at the Mercury News my wages and benefits changed, not always for the better. The level of bull-hooey went up and down a lot, largely depending on the health of recruitment advertising and the occupant of the publisher’s office.

As long as I stayed I figured I had agreed to put up with all of this.

The changes that are coming will make it harder for people to renew the covenant. There will be a lot to put up with. Thinking about the threshold in advance will make it easier for you to decide whether you want to accept the new covenant or move on.