Lesson #377: What to Expect After a Change in Control of Your Business

Congratulations, you just sold
your business!  But don’t expect things
to remain the same under the new ownership. 
Oftentimes, new owners have a different vision of what to do with your
business to help achieve their needs, and they may have different ideas on how
best to do certain things inside of the organization, resulting in a ripple
effect of chaos for the transitioning staff in its wake.  This post will help you figure out what to
expect after a change in control, so the expectations of you and your team are
properly managed ahead of time.

Every Single Aspect of Your
Business Can Change

Even if the buyer says nothing
will change post-sale during their “romance” period of getting you to agree to
a sale, that is rarely the case, as a buyer starts to put their own
fingerprints all over your business. 
This could be things like changing your product mix or website to better
bias their products or other preferred vendors. 
Or, changing all the various systems your business uses for accounting,
marketing or operations, that will be a learning curve for the legacy staff.  Or, the other specifics of your business,
like the details of your sales and marketing plan, or the details of your sales
commission plans, as the Buyer may have experience in doing these things in
other ways that better syncs with their current business.  So, the point here is to get ready for a lot
of change.

Get Ready for Potential Layoffs

Even if a buyer says they plan on
keeping everyone post sale, that doesn’t mean they will.  There are high odds that overlapping
positions, especially in the management ranks, are likely candidates for the
buyer to want to remove.  And a buyer
will be a lot less willing to carry any struggling staff members, that you were
more forgiving with.  If a salesperson is
not hitting their sale quota, or the sales organization has too much excess
capacity in relation to the leads coming in, those staff members will be a
risk.  So, prepare for this during your
negotiation period, to make sure any severance packages are pre-negotiated for
any layoffs in the first year, to protect your staff members.

Get Ready for a Lot of Paper-Pushing
Busy Work

Everything is going to change post
sale.  Your legal entity’s name, your
bank accounts, your credit cards, your sales tax filing systems, your
government contracts, your social media profiles, your about us pages, etc.  Prepare to backburner your normal work for a
while, as all this minutia gets sorted out, setting everything up for the new
owner and communicating such changes to all of your staff, customers, vendors,
partners, etc.  And your finance team is
most likely going to be doing lots of post-sale report building and auditing
for any working capital adjustments or other post-closing monies that are
moving around between the parties.  The
first few months post a sale will not be your most efficient work months!

You Need to Prepare to Let Go
of Your Baby

Your “baby” is grown up now and post-sale
is somebody else’s “teenager” to worry about, not yours.  Psychologically, this can be a very difficult
time for the founders to transition through as the new owner starts to
implement their vision and desired solutions, which most likely is different to
how you were doing those same things before. 
That is okay; let go of any “sacred cows”, be flexible to the new
owner’s needs and don’t have any opinions that are “set in stone”.  If you think they are screwing something up,
that is their lesson to learn, even if you communicating your past learnings on
such topics are falling on their “deaf ears”. 

You May Need to Find a New
Passion

Nobody loves a business as much as
its founder does.  And that founder
invests a lot of blood, sweat and tears in helping that business grow and
succeed.  But once you cash out, and you
no longer have the economic upside you once had, your emotional ties to the
business will start to fade over time.  When
you feel that passionate flame starting to burn out, most likely within a few
months of closing your transaction, that may be a good time to start looking
for your next “baby” to raise, where you can get that passion back from your
next venture.  It is very hard to simply
be an “employee” in the buyer’s organization, after you have had been “steering
the ship” for all the years prior.

Closing Thoughts

I have been the CEO of three
businesses that were scaled and sold to a new buyer.  The themes discussed in this post come from firsthand
experience of what happened in the wake of each of those changes in control.  So, before you sign your name to your pending
sale agreement, make sure you can deal with the above issues raised,
practically and psychologically.  If you
can’t, maybe you shouldn’t sell?  But, if
you can, make sure you go into the sale process “eyes wide open”, and for
anything that you feel could become post-sale issues you want to protect against,
make sure you get it pre-negotiated in your sale agreement before you sign on
the dotted line.  Good luck!

For future posts, please follow me on Twitter at: @georgedeeb.