By Arlen Gunner
In the sale of a private business, the acquiring party may view the continued presence of the entrepreneur, who presumably commanded the loyalty of his previous employees, as an obstacle for the acquiring company to imprint its own management style on the business and its employees. Many times, consulting or employment agreements with the previous owner do not work out due to the inability of the entrepreneur to adjust to the new set of circumstances in which he finds himself, mainly, no longer in complete control. The adjustment to not being the boss anymore can be very difficult. This, along with the loss of a place to go every day, could be a very real struggle for the seller to contend with.
On the other hand, if it turns out the acquirer is counting on the continued presence of the seller (at least in the beginning) to assist with business operations, the acquirer and the entrepreneur should have a serious discussion prior to the closing of the transaction about the exact role that the entrepreneur will play post-closing. It should be made very clear, not only to the entrepreneur, but also to the employees, exactly who will be running the business and who is at the top of the hierarchy. An ambiguous structure could hinder the integration of the business into the acquiring company. The failure to do appropriate preplanning can cost all the parties involved, so it is imperative that such planning occur prior to the closing.
To the extent that the selling entrepreneur will remain with the company, it is important for him to have a written agreement, which is as detailed as possible, setting forth his duties and authority post-closing. It is wise to have counsel review these documents to make sure that there is no ability of the acquiring company to subvert any authority granted to the entrepreneur post-closing. There should be prohibitions set in place that prevent the acquirer from diluting the seller's authority through direct or indirect means.
In the event that a foreign company is acquiring a business located in the United States, there can be not only managerial differences, but cultural differences that need to be understood and dealt with as well. It may be advisable, once the acquirer determines which senior managers they wish to retain, to have a third-party consultant brought in to analyze the cultural differences and to draw up a strategy in order to best integrate the companies.
Lastly, if the entrepreneur is in the enviable position of retiring from his business or working on a drastically reduced basis, what is he going to do with all this extra time he will have on his hands? Many times people who are creative and active businesspeople have a problem adjusting to the loss of structure usually provided by a business environment. The answer? Develop a hobby! This is a wonderful opportunity for the entrepreneur to expand on existing interests or pick up something new that will at least offer a part-time outlet for his creative energy.
When an entrepreneur sells his business, a lot of things change; not just for the company, but for the entrepreneur personally as well. Regardless of whether the entrepreneur is required to stay involved with the daily operations of the business, or whether he is given a consulting arrangement, there are several factors an entrepreneur should be prepared to face before he signs on the dotted line.
In the sale of a private business, the acquiring party may view the continued presence of the entrepreneur, who presumably commanded the loyalty of his previous employees, as an obstacle for the acquiring company to imprint its own management style on the business and its employees. Many times, consulting or employment agreements with the previous owner do not work out due to the inability of the entrepreneur to adjust to the new set of circumstances in which he finds himself, mainly, no longer in complete control. The adjustment to not being the boss anymore can be very difficult. This, along with the loss of a place to go every day, could be a very real struggle for the seller to contend with.
On the other hand, if it turns out the acquirer is counting on the continued presence of the seller (at least in the beginning) to assist with business operations, the acquirer and the entrepreneur should have a serious discussion prior to the closing of the transaction about the exact role that the entrepreneur will play post-closing. It should be made very clear, not only to the entrepreneur, but also to the employees, exactly who will be running the business and who is at the top of the hierarchy. An ambiguous structure could hinder the integration of the business into the acquiring company. The failure to do appropriate preplanning can cost all the parties involved, so it is imperative that such planning occur prior to the closing.
To the extent that the selling entrepreneur will remain with the company, it is important for him to have a written agreement, which is as detailed as possible, setting forth his duties and authority post-closing. It is wise to have counsel review these documents to make sure that there is no ability of the acquiring company to subvert any authority granted to the entrepreneur post-closing. There should be prohibitions set in place that prevent the acquirer from diluting the seller's authority through direct or indirect means.
In the event that a foreign company is acquiring a business located in the United States, there can be not only managerial differences, but cultural differences that need to be understood and dealt with as well. It may be advisable, once the acquirer determines which senior managers they wish to retain, to have a third-party consultant brought in to analyze the cultural differences and to draw up a strategy in order to best integrate the companies.
Lastly, if the entrepreneur is in the enviable position of retiring from his business or working on a drastically reduced basis, what is he going to do with all this extra time he will have on his hands? Many times people who are creative and active businesspeople have a problem adjusting to the loss of structure usually provided by a business environment. The answer? Develop a hobby! This is a wonderful opportunity for the entrepreneur to expand on existing interests or pick up something new that will at least offer a part-time outlet for his creative energy.
No comments:
Post a Comment