Preparing for Life Post-transaction
Congratulations! You have punched out! Now what?
Hopefully, you have thought about this subject sometime before the day after closing. Most owners have at least a vague idea of what they want to do, and many have a second life all planned out. Being prepared for life after a transaction is a good idea not only to help set up a smooth sale but also to give you the motivation to get through the deal process.
Many business owners plan to travel and play golf, but that gets old pretty quickly. Your spouse may have their own ideas, and the golf handicap generally does not go down much with age. Most buyers want the seller to stick around—full-time, part-time, or on a gradually reduced basis—for some time after closing. As a seller, if there is any deferred compensation—such as an earnout, seller note, or carryover equity—you might want to stick around and keep an eye on things anyway. If the seller has a transition period of a few months or years, there may be more free time than before and less stress, but life post-closing won’t be as free and easy as the seller may have originally thought.
Preparation for post-transaction life has two main aspects: the nuts and bolts of financial and estate planning, and the “softer” issue of what to do for the rest of the seller’s life. For the nuts and bolts matters, be sure to consult with a wealth advisor, tax advisor, and an estate attorney well before getting into the business sale process. Being well-prepared will save time and money in the end. Also, you can kill a great deal if you need to delay things a few weeks to make last-minute changes to your estate just before closing.
Being prepared for life after a transaction can help focus the seller and provide motivation during the deal process. We have had several deals delayed or postponed because a seller has decided mid-transaction that they did not truly want to sell, that they wanted to keep the business, or that they were worried that the proceeds would not be enough to fund their retirement. It is always best to have these matters decided before starting the sale process, as advisors can be expensive, and buyers might not want to come back to the table a second time.
Many sellers have a firm idea of what they want to do once their responsibilities with the business have wound down. Some want to get into the M&A business (call me), some want to focus on charity/non-profit work, and others become consultants (imagine attending IPC APEX EXPO next year and not worrying about buying equipment or whether the shop is on fire). Some already have a side business that doesn’t compete with the business for sale. Hobbies, travel, and spending time with family (especially grandkids) are all great too. We have found that sellers who have a wide variety of solid post-transaction interests seem to really enjoy their second lives. Interestingly, many sellers who claimed that they never wanted to see another PCB in their lives actually missed the industry after being away for a few months.
Hopefully, the sale of the business will be a triumph, and the seller has enough funds stashed away to be comfortable. However, even in the case of distressed sales or bankruptcies, the owners can enjoy the next phase of their lives. It’s always hard to tell when it is time to keep trying or to pull the plug, but if the time has truly come to pull the plug, it’s best to do it professionally and as quickly as possible. It is easier to get a second chance if the sale was carried out in an organized manner, without leaving stakeholders holding the bag. Some sellers have found that they really enjoy the industry but did not like other aspects of running a business. Selling can be like taking a giant Aspirin, no matter what the situation was with the business.
We have known many owners who have joined peer groups, hired executive coaches, or started therapy (or all three!). These can be great ways to talk with people who are in similar situations and or have dealt with these experiences. It’s not always easy to talk with a spouse, the VP of sales, the people in shipping, etc., about these matters, plus they really don’t want to hear it, and their advice probably stinks. While it is important to prepare the business for sale, be sure to prepare yourself for life after closing as well.
Tom Kastner is the president of GP Ventures, an M&A advisory services firm focused on the tech and electronics industries. He is a registered representative of StillPoint Capital, LLC—a Tampa, Florida member of FINRA and SIPC—and securities transactions are conducted through it. StillPoint Capital is not affiliated with GP Ventures.
