See You on the Other Side

How business buyers can plan for a successful transition.

By Jenna Schnuer

Al Statz, President of the Exit Strategies Group, talks to Entrepreneur and answers questions on how to ensure a smooth transition for business buyers.

Q: I’ve started talks with a company’s original owner to acquire her business. How do I make sure my first days as the new owner go… well, is smoothly asking too much?
A: Ah, the first-time buyer. After talks get going, there’s always that day when you wake up and say, “Oh yeah, I’ll need to run this place.” A smooth transition isn’t too much to ask for—as long as you start working toward it early in the acquisition process. Your most important tools for a better Day One?
A strong transition plan and the wisdom of the company’s original owner.“In successful transactions, the principals have time, after the negotiating is done, to sit on the same side of the table and focus on the transition plan,” says Al Statz, president of Exit Strategies Group, a business brokerage, merger and acquisitions and valuation firm in Petaluma, Calif.

Statz advises talking transition before there’s an offer on the table. You’ll need the original owner to be on your side as you work toward taking over the company in the meantime.
Statz says it’s vital that discussions include a wide variety of transition issues in the areas of constituents, legal and compliance, financial, public relations—all the critical functions of the business.

It may seem reasonable to wait until after you’ve made an offer on the company to start transition talks, but that’s actually too late. “There’s far too much at stake, for both parties, to leave the transition to chance,” Statz says.
“There are many details, and the devil actually lies in these details,” he further adds.

You must learn to respect the past. You’re not just buying a company; you’re also buying a history of relationships. “Therefore, you must develop a plan to rapidly learn the nuts and bolts of the existing business operations, before you decide to change the existing set of things,” Statz says. “Until then, don’t be so arrogant as to assume that you know more than the seller.

After you have mastered these nuances, make incremental changes. A major mistake could wipe out the goodwill that took years to develop under the previous owner.”
Your acquisition timeline and to-do list should include discovery, negotiations and transition planning. Statz suggests finishing discovery and negotiations early in order to focus on the transition itself. “Buyers ultimately take the lead on establishing the transition plan and should allow closing to occur only when they are satisfied with the plan,” Statz says.

Also, now that you’ve spent time getting to know the seller, work an ongoing relationship into the transition plan.
Notes Statz: “A two-minute phone call to the seller while he’s sipping a Mai Tai cocktail on the beach can
easily be worth thousands of rupees to you and your business venture. So, it is definitely worth trying to do that.”

Tags:
acquisition, al statz, business, exit strategy, negotiation, transition