Transition/Continued Involvement Post-Sale
Once the sale is successfully completed, the owner will often be required to be involved in the business in some capacity for a certain period of time. This will greatly depend on the type of buyer, the management team of the seller and the structuring of the sale proceeds. Here are some common scenarios:
Continue as a Consultant for the Transition Period – This is often the situation in predominately an all-cash transaction and where either the owner has a strong management team or the buyer’s management team can start managing the business. The transition period is generally no longer than 6 months.
Continue to Run the Business either as an Owner or Senior Executive – This is a situation where the owner wants to or is required to continue his involvement in the business either because they retain an equity interest post-sale or there is a significant earn-out component or they wish to continue as a senior executive of the acquiring company.
Continue to Run the Business or be Involved in Limited Capacity – This is a situation where the owner either continues to retain limited equity or has provided a seller note to facilitate the financing of the transaction. In this situation, the Buyer typically brings in a Leadership team to run the business. The owner is either part of the leadership team or a member of the Board of Directors.
The owner needs to be prepared to be involved in some permutation of the above scenarios.
At Distinct Capital, we understand the owner’s needs and we will work with you hand-in-hand to structure the transaction that will help you realize your goal.