In our last blog, we talked about what it takes to get the deal back on track if you find yourself at a stalemate with the other side (and their lawyer). Now that you have applied those simple rules and principles, you are probably ready to exchange contracts.
Congratulations! This is the point in the business sale process where you would be forgiven for celebrating with a glass of something nice!
Exchanging contracts can be a strange sensation for buyers and sellers, because over the last few weeks they have been negotiating on opposing sides, and by the flick of a pen they are now reunited side by side as they start to focus on the practical aspects of transitioning the business.
Believe it or not, even though there is a contract in place, there are still plenty of things that could go wrong. They could be minor, and cause nothing more than a small inconvenience to a buyer. Or they could be significant and material to the performance of the business.
We believe the seller has a responsibility to hand over the business in the most robust and proactive manner. Equally a buyer has a responsibility to contribute to the nature and conduct of the entire operation during a handover, and not get in the way.
Ultimately the most important thing for both sellers and buyers to recognise, is that the business still belongs to the seller and they are entitled to continue their normal trade.
The time between exchange and settlement can be awkward and it is very important that boundaries are set so that the buyer and seller know in advance what is expected of them.
We call this the Handover Checklist, and it is unbelievable how so many parties go into this handover period blind and without a plan.
A good handover checklist should detail the following:
Starting with the most important – A plan and strategy for informing the staff. Remember a change of ownership can be an extremely exciting time for staff if handled properly. If not, they can feel insecure quickly. Part of this process may include employment agreements with the new owner.
The exact hours that both seller and buyer will be physically present during the handover period.
A plan and strategy for informing the customers and introduction to key customers.
A plan and strategy for informing the suppliers and introduction to key suppliers.
Consider changes to bank accounts details, and who needs to be informed?
The plan for changing over EFTPOS facilities?
Who is responsible for transitioning the utilities?
Who is responsible for transitioning scheduled servicing and maintenance providers?
Who is responsible for transitioning digital and non-digital subscriptions?
Access to IP, trade secrets, and processes and how will they be delivered?
A plan for transferring contracts and continuing obligations.
A plan for transferring or obtaining licenses and permits?
As you can see there is a lot to think about after contracts are exchanged. It is really important to begin the handover period with a plan, and specific boundaries in place that accommodate the buyer's needs, whilst respecting the Seller’s business - while it is still theirs!
Your business broker can help you put together a plan that works!
Good luck!
Daniel Kogan
(m) 0401 620 918
(t) (02) 8923 2632
Dan Levitus
(m) 0450 326 146
(t) (02) 8923 2632