Closing a business sale is just the beginning. Learn how to manage integration or transition effectively to protect and drive value in Part 4 of our Business Sale Basics series.
Closing the sale is a major milestone, but it’s not the end of the journey. Proper planning for integration or transition ensures long-term success for both you as the seller and the buyer. Again, due consideration for these matters has already been given in Part 2 of our series (Structure the Sale).
Post-Closing Considerations
1. Integration / Transition Planning
Clear documentation in one or more appropriate agreement(s) is key to ensuring the intended transition mechanics. Consider the following factors when drafting appropriate documentation.
- How and when the buyer will assume operations.
- How and when will the owner / seller notify existing employees, customers and vendors / suppliers of the sale? What steps are necessary to ensure business continuity for these groups?
- Whether and what level of involvement the owner / seller will continue to have in the company and for what time period.
- If the owner / seller remains involved:
- What type and level of pay and benefits will be continuing?
- Will the owner / seller retain any percentage ownership in the equity of the company (i.e., a rollover interest)?
- If the owner / seller is exiting:
- Address any interim transition period / consulting arrangement, earn-out, or other phased exit plan.
- If the owner / seller remains involved:
2. Tax and Regulatory Compliance
Post-closing reporting is just as important as pre-closing planning. Consider the following compliance items after closing.
- Required tax filings for the transaction.
- Required industry / regulatory filings for the transaction.
- Tracking for installment sale payments or deferred compensation.
3. Avoiding Post-Closing Disputes
A seller who has successfully navigated the process following our Business Sale Basics: 1. Prepare the Pieces, 2. Structure the Sale (Legal & Tax), 3. Align Team, Finance, & Industry Factors can expect to be in good position to avoid post-closing disputes. Below are some key factors expected to be in place and continuing to achieve that goal.
- Keep documentation clear to reduce claims risk.
- Follow through on representations and warranties.
- Maintain open communication with the buyer during transition.
Thinking about selling your business? Start with a pre-sale consultation to evaluate your company’s readiness and identify strategies to preserve and maximize value. Connect with Nick Eusanio, Tax & Compliance Partner at DBL Law, to learn how proper tax planning and deal structure can help you achieve the best possible outcome.
