No Access to Employees or Advertisers Pre-Close???

searcher profile

March 09, 2022

by a searcher in Austin, TX, USA

Hi all, I just submitted an LOI on a business for 1.3mm and the feedback from the broker was "the owners would prefer to hold off any introductions to any employees or advertisers until after close."

It's a brokered sale with 50/50 partners who both seem motivated to sell. It's a digital business that's primary revenue is monetizing their member network through leads and direct sponsorship. It has real transfer risk as both owners are not active but very visible in the organization. One employee is a GM and two of the advertisers account for 25% of the revenue. I offered to limit the access to key employees and the top 3 sponsors and delay the introductions until the end of DD.

I have a good relationship with the sellers and they told me that they would prefer I buy the business over any of the other sellers. They genuinely seem invested in the post sale success and have no problems carrying a note and committing to transitional training and a lengthy post sale consultation.

Has anyone else dealt with this? Any ideas on the best ways to mitigate the risk?

0
4
72
Replies
4
commentor profile
Reply by a professional
from Dartmouth College in Los Angeles, CA, USA
This is an issue in almost every deal. The best solution is to sign a purchase agreement with closing subject to satisfaction of certain closing conditions, one of which would be you obtaining written or other comfort around key employees going forward before the deal closes. This way the seller has some amount of deal certainty but you don't close without any conversations with employees. Typically as the deal gets more certain sellers are more willing to make management level employees available.
commentor profile
Reply by a lender
from Carnegie Mellon University in Pittsburgh, PA, USA
you can structure it so you "paper close" first like Brian suggested, but generally speaking, just do save those critical pieces until the end or further along. don't let the broker tell you that you cant do the DD you want to do
commentor profile
+2 more replies.
Join the discussion