What Happens After Closing the Transaction?

When buying a business, transactions can get complicated and frequently the negotiation process can be cumbersome. It's easy to get caught up in the back and forth activity of the negotiations and breathe a sigh of relief when an agreement is reached and everyone finally gets on the same page.

Depending on the size of the business and the location, closing may be completed through an escrow company or through a closing attorney. Prior to closing, however, there are many things in addition to due diligence which must occur during the transaction period.

Most purchase agreements include a post acquisition training or transition period ranging from 30 days to a year or more. It is important to ensure both Buyer and Seller are on the same page with respect to post acquisition transition expectations. What duties does the Buyer expect the Seller to perform in terms of training and transition? Is the Seller expected to introduce the Buyer to clients and vendors to help transition relationships? Or was it determined that a better strategy would be to keep the ownership change low-key for a few months so the transition would be seamless? What about employees? How much do they know, if anything?

A successful transition begins with a well thought out plan and it is important for the prior business owner to fulfill all transition commitments, and to document his/her involvement with transition activities as well as any post acquisition requests.

Does the company need a transition team or is the business small enough that the Seller will transition the business to the Buyer as an owner-operator? Is there currently a management team? If so, will they be staying or ultimately transitioning out? How many employees are there? How many departments are there? How many locations are there? Will any locations be consolidated? Are there systems integration issues? If the acquiring company uses different software systems, is it desirable to change over? If so, how long will it take to convert historical data? How will training of the employees be facilitated?

A transition plan is a project in and of itself. It's important to identify top-level transition goals and then to detail each goal into department level requirements. Then, for each department level requirements, tasks must be identified and each task must be assigned to a member of the transition team or to an identified employee that will be held accountable for completion of the task. Regular review meetings between prior and new ownership will help keep the transition plan on track and will provide opportunities to ensure expectations are being met.

The best transaction can ultimately result in failure if the transition is not implemented correctly. A good transition is a successful conclusion to a good transaction.

Contact us today for further information on our transition planning assistance.