Experience with Seller Running the Business Post Close

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by a searcher
in Toronto, ON, Canada

1yr ago

Experience with Seller Running the Business Post Close

Would love to chat with anyone who has experience in having the seller continue to run the business post close. For reference, it is a strategic acquisition so the business being acquired will act more like another branch or location, and less stand alone.

1 Like

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reply by a searcher 1yr ago
from The University of Chicago in Philadelphia, PA, USA

Happy to chat in more detail about this: redacted led transitions across the spectrum A) Seller stayed on and it was the wrong choice B) Seller stayed on and it was fantastic C) Seller transitioned after 6 months and it worked well.

Biggest takeaway: the deal process is the type of stressful event where people show their true colors. Pay attention to how they handle that stage, and it will show you whether they will be willing partners post-close

reply by a searcher 1yr ago
from Kansas State University in Salina, KS, USA

We've done this and I would say that it depends on the situation. In general, I have not found this to be a great long-term solution unless you feel VERY good about the seller's character, integrity, etc. It's easy to have rose-colored glasses on when looking at a new deal... but I would agree with Byron's comments above in that you have to be painfully honest about whether you think they're the right person to make this work. It can be incredibly painful and stressful if it doesn't work out.

We've found it to work fine for transitionary periods. It could work for a long term solution but would take a special person. Even if they want to stay on for the foreseeable future, I typically try to communicate to them that we only expect for it to be transitionary period (maybe 6 months to a year) and then we can re-evaluate and see if it makes sense to continue after that point.

My other advice would be that it's all too easy to agree to a large salary up front when they ask for it.. I would try to be very conservative about salary expectations... On one of these that we did and it didn't work out, the seller turned employee seemed to act like he had given us the business and we were ripping him off anytime we didn't give him what he asked for.. We felt like, even though we'd purchased the business, he was still holding it ransom until we gave him whatever he wanted. Looking back, I think that he thought the situation was going to be perfect because he wouldn't have to do much and would get a paycheck forever.. Once it sunk in that he was still going to have to work hard (maybe even harder than he had been prior to selling), it got ugly pretty fast.