The key issue for the company is the transfer of information from the seller to the buyer and vice versa. Three different perspectives are adopted to shed light on this withdrawal process for the company.
1. From the company’s perspective
2. From the buyer’s perspective
3. From the seller’s perspective
The form of withdrawal chosen and determined depends heavily on the seller’s role to date. As a shareholder who is no longer actively involved, a withdrawal can take place at any time, since all relevant information is available within the company and there is no requirement for a change in management. The more the seller was—and is—involved in day-to-day operations, the more detailed and comprehensive the transfer of information should be.
In traditional medium-sized businesses with an active managing partner, this option is very rare. In the majority of the transactions examined, formal provisions governing the period between the signing of the SPA and the seller’s final departure from the company—including in an advisory capacity—are included in the SPA or otherwise set forth in a separate agreement to ensure the necessary enforceability. In doing so, it is essential to define not only temporal but, above all, substantive aspects.
At its core, the goal is to convey the existing business model in all its dimensions—not merely to transfer the relevant customers. A “Business Model Canvas” can be a useful tool for this, but other ways of presenting the business model can also help facilitate the transfer of information in the best possible way.
1. The Company’s Perspective:
Keeping the sale—and thus the seller’s exit—confidential for as long as possible is, on the one hand, essential for the sale of the company; on the other hand, however, it also poses a risk for the company that should not be underestimated. A particular danger lies in the loss of knowledge and experience due to uncontrolled turnover of key personnel or employees with strong customer relationships. Here, the seller bears a special responsibility to communicate the transition clearly and with a vision for the future, as the company is undergoing a classic change process in which the employees were not involved. Consequently, there is a risk that employees will view the handover process critically.
2. Perspective of the Acquirer/Buyer:
Based on the negotiations, due diligence, and discussions with the seller—and in light of the acquisition’s objectives—the buyer has already developed a clearer picture of the situation and the transfer process. They will also have contractually agreed upon an appropriate transition period and the scope of the transfer to ensure the handover of the entire business model. Clearly communicating the acquisition strategy and the objectives of the purchase helps to realize synergies more quickly and reduce the emotional impact on employees.
3. The Seller’s Perspective:
The former shareholder has typically managed and shaped the company over many years. The sale of the company was carried out with the goal of pursuing other priorities in life. The SPA should clearly stipulate which obligations must be fulfilled as of the signing and which responsibilities remain in effect. Typically, consulting or new management contracts are drawn up for the phase following the company’s transition. The rules in effect until the transition—namely, that the company must be managed in accordance with the principles of sound business practice—should not be explicitly addressed. In addition to the purely technical aspects of the transition, including rules regarding responsibilities and obligations, emotional factors also play a significant role for the seller. For many entrepreneurs, letting go is a balancing act between relinquishing responsibility, information, and leadership. With the transfer to the buyer, management—and thus decision-making authority—typically changes as well. The buyer will set their own standards for workflows and processes, thereby altering the operational and organizational structure. A seller may perceive this as criticism of their previous work. Consequently, timely communication from the buyer to the seller is also of particular importance.
Summary:
In addition to the technical aspect of transferring responsibility, the seller’s withdrawal represents a critical change process for the company. Clear communication and unambiguous contractual provisions regarding the timing and scope of the transition are essential. The use of a Business Model Canvas in conjunction with a Kanban board can be a useful tool for shaping the transition process.
