Nine Steps to a Successful Business Sale – Part 9: Manage the Transition

Nine Steps to a Successful Business Sale: Part 9: Manage the Transition

In Part 8, we discussed Seller Financing.  Let’s assume that careful seller financing closes the financing gap. In this part, we consider transition issues.

The buyer wants to have a smooth transition of the business from the old owner to the buyer, with minimal disruption in sales, operations, and employee productivity. If the transaction is a merger, both parties have an equal stake in making the transition successful. What can we do to make this more likely?

Step 9.  Manage the Transition

There are several scenarios that require some transition management:

  • The buyer wants to keep the entire management team, or only certain key managers.
  • The buyer wants to bring in some of the buyer’s own team members, and the integration of the teams is critical to success.
  • The buyer wants to retain the exiting owner, or perhaps some key employees, for a period of time, to train a new management team and to help transition the existing customers to the new management team.

It’s a good idea for the buyer and seller, working together, to establish a transition plan in advance of closing. 

If an earn-out is involved, the seller should be particularly motivated to work out a careful transition plan to make the earn-out as successful as possible.

The transition plan should be started early on in the acquisition process.  Often, the formal transition plan will be developed once the Purchase Agreement is signed and before closing.

It is common for the parties to form a transition committee to handle this task. The transition committee should consist of key persons from both sides. If the current owner or any key employees are staying on, some of them should be involved. If not, it might be worthwhile to hire someone from the seller to act as a consultant on transition issues for a fixed period of time. 

The transition committee is tasked with developing the transition plan. After the buyer’s board approval, the transition committee shares the plan with management, employees, and other stakeholders to get input and buy-in on the plan for maximum success. 

The transition committee is also tasked with implementing the transition plan after the closing. If the buyer has a capable HR department, the HR team will be integral in implementing the transition plan. In any case, managing the transition will be beneficial to all parties. 


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Kimberly Lowe

Kimberly Lowe

For over 20 years I have lawyered from the trenches with experience based on a comprehensive knowledge and understanding of how both for-profit and nonprofit enterprises operate. I guide entrepreneurs, executive management teams, boards of directors, multigenerational families, shareholders and investors through all aspects of the business life cycle from formation to operation to exit. Read Kim's Bio.

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