We’ve previously discussed what to expect when selling your business, but what happens after the sale closes? After all the craziness that characterizes almost every deal finally ends? One of our clients generously shared some thoughts, which we will post below. Anonymously, of course.
How long did you operate your business? 16 years.
Did you start it from scratch or buy it from someone? Started from scratch.
What was your approximate sale price – <$1m, $1m-$5m, $5m-10m, >$10m? $1-5M
How long has it been since you closed on the sale of your business? 3 years.
How long has it been since the deal was completely done, in other words neither you nor your buyer had any obligations toward each other? One month ago today I received my last payment.
Where did your buyer come from? From California via a broker in my industry.
Did you consider your buyer a friend of yours? No.
What made the decision to sell? Stress and the death of a close family member.
Were you initially excited about selling the business? Yes and no – yes, to help eliminate the stress and spend more time with my children; no, because the company was my baby.
What was the best part about the process prior to the closing? Negotiating pricing and terms.
What was the worst part about the process prior to closing? Keeping it secret to staff and clients; preparing all the necessary documentation while simultaneously operating a business.
What was something that surprised you about the process prior to closing? Thoroughness of information shared – never realized the breadth and depth of information that would need to be gathered. Plan on the process to take more time than you expect unless you have prepared carefully in advance.
How did you feel immediately after closing, relieved, uneasy, excited, sad, accomplished? I felt accomplished and sad.
What was it like to go to work for your buyer? It was a very tough experience – we had very different management styles.
What was the best and worst part about becoming an employee of your own company? I was fine being an employee (was looking forward to a stress relief) – I was very unhappy with the management style and what that did do “my company”. Most of my employees whom had been with me for many years ended up quitting or were removed within a year.
What were you surprised by in the first 6 months after selling your business? That a company would buy another company and then disregard everything that made them a leader in the local market of their industry.
Whether it relates to the sale of the business or the employment? Sale of business was smooth – I had a competent broker, thorough accountant and excellent legal representation. Employment was miserable – they expected, actually demanded, a very different management style and their cultural was harsh on the existing employees of my company.
If you had it to do differently, what would you change? The company that bought my company :). No seriously, I now understand the importance of vetting the company that is buying. Ask to interviews owners of other companies they have bought before. Talk to the buyer’s employees and clients, and truly understand the company’s culture and values. Ask more questions and then ask some more.
What was something that you feel you nailed (did right)? I feel we did a good job of negotiating the deal. Counsel arranged the employment agreement and the Master Sales Agreement (MSA) into separate documents so that one did not affect the other, In the end, I received all my payments, but that was because my attorney made sure the deal was ironclad. Advice: never be satisfied with first offer; always show confidence; don’t get so excited that you forget about negotiating the details – in the end those details really count! Know your worth going into negotiations, and then REMEMBER your worth. Always know, there are other buyers out there – especially in this economic market. You are in the driver’s seat – 2020 is going to be a great year to sell – buyers are on the hunt.
If you could remember back to a year after closing, what were you surprised by? A year after the sale, I was shocked by the difference in the company: few original employees left; processes changed (some for the better due to economies of scale); loss of some long-term clients; values and culture shifted, and many loyalties eroded.
What are you surprised by today? Nothing after I understood who the buyer really was. The company has lost all original employees and many long-term clients.
What advice would you have for other business owners interested in selling? Remember your mission and carefully, very carefully, examine the buyer. They will look at every aspect of your company, so make sure you do the same! If you have a negative gut feeling – closely investigate the situation. Make sure your values align and your customer base is similar, and equally as important, truly understand their management style.
Get good counsel! Someone who has experience and will battle for you. This is an intimate experience, so get someone you trust and who will be by your side (Gina Bongiovi is the very best!). Make sure your accountant understands mergers & acquisitions too, as they will be helping you gather all the financial reports needed, and there are many. Use a broker – even though they seem expensive at the time, they know how to establish your company’s worth, and then fight for it (they are motivated for you to sell for more because that is what their commission is based on).
If you could talk to buyers, in light of your experience, what would you tell them? If you are buying a company because of their success, then value how and why it came to be. Please clearly explain your plans to the selling owner so they understand your vision, management style and how you will restructure their company. Lastly, clearly discuss the role you want the owner to play in the new company.