Tip Number 10 is “Tie Up Loose Ends”, and I have personal experience with this one.
Harvest Business Advisors represented a seller who had a successful mechanical/geothermal company. The seller was planning for retirement. The prospective buyer was searching for a company that offered skills, experienced staff, and an opportunity for diversification. It was a perfect match. The buyer/seller meetings went very well with good conversations and good connection between the two parties.
Late in the game there arose a problem, however.
- In Harvest Business Advisors’ e-book, “10 Ways to Increase the Value of your Business Before You Sell” we advise sellers to consider 10 important practices to employ in preparing to put their business on the market.
During the due diligence process, Harvest Business Advisors learned that only half of the sellers’ staff had signed a non-compete / non-solicitation agreement. In fairness, several of the current managers were not “key” when they started working there but over the years, they had progressed to key management levels. The seller never thought to have them sign a non-compete / non-solicitation agreement. Definitely not what the seller anticipated and not what the buyer wanted to hear.
The night before the scheduled close, we had not delivered all the executed non-compete agreements to the buyer who had been very clear — if the agreements were not delivered pre-close, the buyer had no choice but to walk from the deal.
We got the message. Emotions were high. We met with the group of managers that night not knowing if they would sign. The next morning, we met with them in one-on-one sessions and fortunately, they all signed. In one instance, the seller provided a “stay bonus” if the manager would accommodate.
The moral of the story?
There are many, many loose ends that can rear their ugly heads in a transaction. Non-compete and non-solicitation agreements tend to “not get done later”. Think about your key staff, make time to meet with them, and get these agreements signed as far in advance of a business sale as possible. Key people are the magic of most companies we work with; you need them on your side before you’re knee deep into you exit plan.
Click here to download a non-compete/non-solicitation agreement for your business.
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Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at firstname.lastname@example.org or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.