M&A Deals Ain’t Over Till They’re Over

There are post-closing issues that we recommend you prepare for prior to closing, including the following:

·      Communication. Just as you managed communications with employees, shareholders, vendors, customers, and others throughout the sales process, it is important to communicate the final closing. The precise communication must conform to prior communications and will likely be something over which your buyer will want final approval.

In one of our case studies, the seller personally addressed her employees immediately after the close of the transaction and then called each of her major vendors. She, with the approval of her buyer, issued a modern-day “press release” in the form of a social media post or link to content on her website that announced the transaction. The release was, in abbreviated form, as follows: “We are pleased to announce we have sold Paws Pet Place to XYZ Company. As we have always said, we believe it is incumbent upon business owners to continually explore their financial and strategic options in an effort to continue to deliver the best experience to their employees, customers, and vendors. XYZ Company has proven to us that they possess the right values, objectives, strategy, and people to best serve our constituents and move this company to the next level. We thank you for your loyalty to Paws Pet Place and are confident that we will only improve with our new ownership.”

·      Earn-Out Management. If your sale contained an earn-out provision, it is essential in the purchase and sale agreement that you clearly define with the buyer the earnings condition or event that will give rise to the payment and how progress toward that condition or event is being made. After closing, you must rigorously monitor that progress.

·      Holdback Management. We recommend constant communication with the buyer to ensure there are no surprises. On at least a monthly basis, we recommend a call with the buyer in which you ask about each rep, warranty, and indemnification that the holdback covers, take detailed notes about the buyer’s representations, and send a follow-up email of their representations and your understanding. If the buyer suggests something is happening that might affect the release of your holdback, call your attorney and schedule a meeting with the buyer as soon as possible.

·      Seller Financing. If you financed part of the buyer’s sale of your business, you need to demand strict adherence to the contractual payment schedule. If the buyer deviates from their contractual obligations, call your attorney and work to ensure full payment on your note.

GROW and SELL Advisors, wholly-owned by Traversi & Co., LLC, is a premier sell-side M&A advisory firm – a boutique investment bank – serving the lower middle market.  Visit us here.

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