Seller compensation after close

by a searcher from Miami University of Ohio

1 month ago

I am nearing a signed LOI and one of the concerns is what the sellers will be paid during the transition period. How have other people handled this? 

1 like
146 views
19 comments

searcher from University of Maryland at College Park

Echoing thoughts from above with a slightly different perspective and suggestion. Separate in your mind (and the agreement for negotiation purposes) the seller's responsibilities as 1) the training period & 2) the transition support period after that training period. During the training period, the seller will spend much more time and effort in active participation. The secondary transition period comes when a seller is out of the business and is mostly interested your success because of their motivation to be paid or see their legacy succeed. The motivations for the two periods are very different. During training, the deal (even if closed) can unwind due to covenants in the agreement causing irreparable harm to you and the seller and of course the business. During the support period, the seller is concerned about any further compensation due (holdback, seller note, earn outs, standbys, etc...) and is more likely to help when they know their success if also yours. With that said if you have any hiccups that you are going to offset the note by without the understanding of the seller - be sure to work closely before they stop answering the phone/email while they are on the beach or on the boat.

1 month ago | like reply | 0 likes

searcher from Colorado State University - College of Business

Following

1 month ago | like reply | 0 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Self Funded Acquisition: A few Things I Learned

Examples of self-funded searcher websites

2 Best Ways To Find Motivated Sellers, Off-Market Deals

What are market terms for Seller Notes?

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.