Completing the purchase or sale of a business is often viewed as the end of a long process. But for buyers and sellers, some of the decisions made after the deal is signed can have a significant impact on its eventual success.
From completion accounts and earn-outs to communicating with employees and customers, the post-deal period brings its own financial and operational considerations. Wilson Browne Solicitors looks at what business owners should be considering once the congratulations are over.
One of the most rewarding moments in any transaction is making that call: “Congratulations, you’ve completed!”
For many business owners, completion day feels like the finish line. After months of negotiations, due diligence and late-night calls, it is tempting to think the hard work is over. In reality, a new phase has begun.
While deal announcements tend to focus on valuations and signatures, the success of a business acquisition can depend heavily on what happens in the weeks and months that follow.
Staff may need reassurance, customers and suppliers need clear communication and buyers and sellers have to navigate the practical realities of transferring ownership, systems and responsibilities. Some of the financial mechanisms agreed during negotiations also only come into play after completion.
Completion accounts are one example. They are commonly used to establish the final purchase price by reference to the financial position of the business at completion.
Depending on the terms of the sale and purchase agreement, one party will usually be responsible for preparing the accounts within an agreed period, with the other given an opportunity to review and, where appropriate, challenge them.
The detail matters. The agreement should set out how the accounts are to be prepared, the accounting principles that apply and the procedure for resolving any disagreement.
Deadlines also need close attention. Failing to challenge figures within the period specified in the agreement can potentially leave a party unable to dispute a calculation with which it disagrees.
Earn-outs can present a different post-completion challenge. They allow part of the consideration paid to a seller to depend on the future performance of the business, helping a buyer manage risk while giving the seller an opportunity to receive further value if agreed targets are achieved.
However, an earn-out can only operate effectively if the transition itself is well managed.
A poorly handled handover can unsettle staff, weaken customer relationships and affect business performance. Where a seller remains involved during an earn-out period, both sides also need to understand their responsibilities and how the business will be operated while performance against the agreed targets is measured.
Preparation for that transition should therefore begin well before completion.
Clear communication is an important part of the process. Employees, customers and suppliers may all require different information about the change of ownership, while buyers and sellers should agree who is responsible for delivering it and when.
The same discipline applies to contractual requirements after completion. Reporting obligations, information requests and deadlines associated with completion accounts or earn-outs can all have financial consequences if they are overlooked.
Ultimately, completion should be seen as an important milestone rather than the end of a business acquisition. Signing the documents and transferring ownership do not, by themselves, determine whether a transaction has been successful.
How effectively the transition is managed and whether both parties continue to meet the obligations agreed as part of the deal, can prove just as important once the congratulations are over.
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