I have had the good fortune to spend 25 years appraising, buying and owning companies; I have retained (and fired) previous owners, onboarded (and unloaded) new leaders and led transition teams to setup the process, the company and the constituents for success. I have seen it implemented effectively with incredible results, and sloppily with unfortunate and wasteful consequences - and learned a great deal. I believe that a good plan poorly executed is a bad plan and am regularly mystified at how often there is little or no plan around the critical Post-Acquisition Transition. Deals are identified, due diligence is rendered and completed, offers made and accepted, champagne corks fly ... and then comes the transition, the hangover.

To add dimension to this concept, let’s look at a fictional deal and make some assumptions: - The purchase in cash of a manufacturing company. In this case, the product is fairly sophisticated requiring engineers and experienced fabricators. - USD 8M Revenue - 65 Employees (45 on the shop floor; 20 in the office/sales) - Previous Owner will be maintained on two to three-year contract o This person is well-versed in the product, built the company (or re-built) it from ground up; took it from a losing venture to 35% gross profit, 5% net o This person is hands on, described as a micro-manager; believed to be essential to the short-term viability of the company o Wants to retire after the transition (reason for selling)
- Incoming Leader is given the position of Director of Operations or similar role to eventually replace the Outgoing Leader (Previous Owner) o Effective Hiring Process is implemented to ensure this person is able to grow the company for the next 5-10 years as per the Business Plan o Product knowledge is not considered critical as the Outgoing Leader is expected to execute the on-boarding o New Owner is seeking a person with the right experience and leadership qualities (Attitude, Aptitude, Skill – in that order) to learn the processes and products, take over for the Outgoing Leader and drive towards an aggressive growth objective o Experience and Personal References are investigated thoroughly

Based on these assumptions, are we ready to launch the Transition? One might think so but if we are missing or undervalued the following, my experience says there is a danger of failing to optimize the transition, perhaps jeopardizing the success of the process entirely (the eyes of all employees will be on the transition):

  1. ###-###-#### Tangibles: o Growth Plan - should be pulled directly from your Deal’s Business Plan o Transition Plan - who does what and when and towards what measurable objective o Timeline - included in the Transition Plan and clearly communicated to the three “primary” transition constituents – the Outgoing and Incoming Leader(s) and the New Owner(s). This is the 3-legged stool that will stand alone if sturdy but topple if any of the individual legs is week or unbalanced. - Interestingly, for decades, the military has had an effective transition concept, known as the “Right Seat / Left Seat Ride” or “Relief in Place” which manages the transition by having the Outgoing Commander in charge (in the “right seat”) for half of the transition period while the Incoming Commander observes. Then the Incoming Commander switches from the left seat to the right seat, with the Outgoing Commander sitting next to her or him, until the end of the transition.
  2. - Link to: US Army Military Police RIP into Iraq Mission
  3.  - As a deployed Combat Arms Company Commander, I exercised this process regularly and it works. However, it requires extreme discipline and the ability for both parties to lead, follow, talk and listen. o Training Plan - what must the Incoming Leader learn – and what is the responsibility of the Outgoing Leader for its implementation and success

  4. ###-###-#### Intangibles:
  5. o No matter how well-defined the transition process is, if the three constituents do not have overlaying synchronicity of effort for the following intangibles, the process cannot achieve its fullest potential. These key characteristics include:  a. Communication (this must include the ability to listen, not simply talk)  b. Personal or Cultural Personality • For an example of Personality, refer to Jim Collins’ Good to Great where he differentiates the Level 5 Leader from the Level 4. If the Outgoing Leader is a Level 4 – that is, if that person thinks that he or she is irreplaceable, and the New Owner has not clearly defined and communicated the Plan and Timeline – the Transition will fail to meet its objectives. Do not shortchange the time and energy spent on extracting the Personality traits of all Constituents.  c. Definition of Success  d. Loyalty to the Company  e. Commitment to the Timeline  f. Willingness to Teach and to Learn o Note that there is always room for common ground on these intangibles but the New Owner must set the tone on Communication, Culture and Commitment to optimize future success – to include oversight and ownership. Just as with Due Diligence, the New Owner needs be visible during the Transition (employees must see all three Legs of the Stool).

A great deal of time and energy is placed on identifying and closing the deal but not enough on the Transition Process. There is a lot more here to discuss in terms of the how and why and what potential pitfalls should be anticipated or minimized but it is important to me that new owners set themselves up for success. I am happy to speak with anyone about their concerns or questions. I would rather spend the time sharing the good and bad from my experiences than having someone enter this critical phase with only scant, theoretical or untested knowledge, and potentially facing an immoveable object that could have been avoided through a brief real-world conversation.