Acquired owner staying on?

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October 18, 2024

by a searcher from Southern Polytechnic State Univerisity in Clarkesville, GA 30523, USA

Curious everyone's take on leaving the existing owner in the acquired company.

I listen to a lot of content & advice and hear opinions from complete opposite sides of the coin. I personally can imagine a lot of Con's, not a lot of Pro's.

For context, I already own a $4M revenue company and we're looking at a $2.5M revenue tuck-in. I have someone I can immediately plug into the management roll of said tuck-in if necessary.

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Reply by a searcher
from University of California, Berkeley in Seattle Metropolitan Area, WA, USA
Totally dependent on what you're looking for. And if the owner is looking to stay on (and why). Is it to collect a paycheck? Is it to get a second bite at the apple from what you're doing? Are they providing use in the company or are they strategic with customers/suppliers and can be useful at the top?
As long as the owner doesn't have relationships that need to continue to be in place, you should have the freedom to decide. Otherwise, some of your choices may be made where you're weighing a significant downside if things weren't transitioned properly.

Ultimately, it's probably most important to assess how critical that owner is to the business operations and weigh their motivations compared to who you may have ready. You need to decide who you'd like to worth with, I would think.
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Reply by a searcher
from Tufts University in Jersey City, NJ, USA
We do exclusively joint ventures where >90% of the time our JV partner is the original owner of the business. There's pros and cons as others have discussed. It really comes down to whether the current owner adds operational value to the business that would benefit from a gradual sunsetting. Inheriting a prior owner means inheriting their strengths and weaknesses, turning the due diligence process into a relationship-building exercise as well. Done well, it's a very nice lever to ensure a smooth transition from one chapter of the business' ownership to the next. Done poorly and you've injected complexity and headaches into an already complex process. Whether it makes sense will largely be situation- and business-specific, where they are the right partner for you in the right business.
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