Experience with owners that want to stay on?

July 23, 2024

by a searcher from University of Pennsylvania - The Wharton School in New York, NY, USA

I'm looking at a deal where one owners wants to sell ASAP, while the other wants to continue working for a few years. The owner who wants to stay is open to different deal structures and I'm curious what others have found success with.

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Reply by an intermediary
from University of Memphis in 5000 Linbar Dr, Nashville, TN 37211, USA

Generally, it is better to have a phase out timeline, with the owner actively engaged in training & transition but then backing off where he/she is available for a day or two per week but after ~ six months available for reasonable access by phone, text, e-mail and occasional meetings. The risks for the owner staying is that employees, customers & suppliers remain dependent on them for direction & answers. The authority & responsibility transfer can be difficult if the prior owner is physically present. Even if the owner is supportive for transferring responsibilities, they will be quicker and more capable to address issues which deprives the new owner of engagement that helps build confidence, trust and learning the business. But there are numerous exceptions, and you have to gauge the prior owner's involvement, their skill sets and the need for their expertise. We see more success where the prior owner is primarily engaged in sales and continues almost exclusively in that role.

Reply by a searcher
from The University of Chicago in Chicago, IL, United States

We had one deal that we came across about 2 years ago. Two doctors, one wanted to sell and other wanted to stay on. We went back and forth for about 3+ months without even signing an LOI and we finally had to walk away. One of the brokers reached out few weeks back saying, the doctors really liked talking to you a 1000 years ago, they would like to see if you are still interested. Needless to say, I am not taking the meeting.

Generally, working with multiple partners has always proven to be exhausting and time consuming. In my opinion, that is because there is not one decision maker. Usually what we found is that if one partner wants out, it is because of his/her health reasons, sour partnership or generally something that is 'bad'. It's almost never in good terms even though it is portraited as one. This does not mean the deal cannot be done. I would prioritize multiple partner deals at the bottom of the list over a single owner deal any day.

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