Once pricing and deal structure are determined, arguably the hardest question an owner-operator will need to answer during a transaction is what role they will play post sale. Assuming the owner is in good health, the decision whether to remain involved with the business post sale, retire, or sit on the sidelines until the non-compete expires will have to be addressed prior to the sale. With preparation, the outcome could be determined in advance of the selling process.
As the owner of the business, what role do you play now? If you are truly an investor-type owner who does not play any role in the day-to-day operations of the business other than a financial one, the decision to remain post sale will be strictly a financial one made by you and the buyer. Most owner/operators don’t fall into this category. Depending upon the size of the business and the number of owners, the owner plays a critical role in the operation and that role will vary significantly from business to business. A sole owner of a relatively small business, for example, may have all of the critical client relationships and also oversee operations. A buyer will undoubtedly perceive this person as critical to remain post-sale and structure the deal around his/her involvement.
The owner of a larger business may perform a particular role and rely upon senior executives to handle other functions. In a service business like a collection agency, for example, where client relationships are critical, if the owner keeps direct contact with the major client decision makers and maintains these relationships post-sale, they will undoubtedly be addressed through deal structure and non-compete and non-solicit contractual provisions.
Deciding one’s role post-sale is a potentially challenging process. Fortunately, Kaulkin Ginsberg can help you navigate those choppy waters. We have worked with small, mid-sized, and large privately-owned companies, Fortune 500 corporations, and financial investment firms on their collection agency M&A strategies for thirty years. Whether you’re seeking professional sell-side representation, assistance forming a partnership or joint venture, or a transaction assessment, Kaulkin Ginsberg will guide you through the process. For more information, or to schedule a confidential discussion of your business goals, contact us here or at firstname.lastname@example.org.