Red Flag if owner does not allow meeting key people prior to close?

November 04, 2025

by a searcher from Columbia University - Columbia Business School in Jacksonville, FL, USA

I am looking at a business with 1.6M in EBITDA in industrial services. The owner is 40'ish and wants to spend more time with his kids. I like the business but the broker said he will not allow the Buyer to meet the key 1 or 2 guys prior to a signed Purchase Agreement. While I see both sides to this, it seems like a Red Flag.

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Reply by an intermediary
from The University of Michigan in Bonita Springs, FL, USA

Most deals I do, I won't let the buyer meet key employees until after all contingencies have been satisfied. The amount of disruption and damage employees can do to a business when they have knowledge of a sale can be catastrophic for the business owner. I can say with confidence, every time it has happened it has worked against both the buyer's and seller's interests. Just a few examples: 1. Buyer insisted on meeting key employees three weeks before the sale. On sale date, all three key employees handed the new owner their two weeks' notice. 2. Key employees worried about losing accumulated PTO and benefits immediately began taking time off driving revenue and profits down before the sale, buyer delayed the sale to see if the revenue and profit would return. The following month was the most profitable of the year because everyone was working and not taking time off. The profits were missed by the buyer and the seller's deal was delayed a month longer than he preferred. 3. Key employees immediately demanded raises from the seller in order to stay on with the new owner. Both Seller and Buyer ended up eating the cost to keep the key employees engaged through both the sale process and the transition period. Employees will always make a deal with the devil they know versus the devil they don't know. They don't know you. Give an employee time to explore their options, they will.

Reply by a searcher
from University of Pennsylvania in Miami, FL, USA

Going in blind is not standard practice - Everything Eric mentions above can happen after a deal closes and then buyer is stuck with these problems without ever having run the business. I would never invest in a situation where key employees are unaware and where buyer (or I) has not met with them. Some mitigations: 1) some type of holdback/escrow or seller note that ratchets if X or Y employee leaves within (6, 12, 18 months) 2) sign PA but closing is contingent on meeting with the 2 employees and being satisfied they are in + will remain with the business + buy into your ownership 3) Let seller know you will put in place post close retention bonuses Some combination of all 3 would be best outcome. But yes....you must meet with these folks....too risky not to. Small biz as you know is risky...much of that risk is driven by the stability of employees and owner. Billion $$$ companies are not exposed to this (or very little).

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