The following article originally appeared in the July 2012 edition of the Myers Report newsletter published by the firm.


Preventing the Business Buy-Out Blues

By: Jane M. Myers, Esq.


When I speak with business owners about how they fared after a buy-out, regardless of whether they were the buyer or the seller, it’s interesting to see why some buy-outs are especially successful.

Over the years Jim and I have represented many business owners who’ve bought and sold businesses. Some use the sale as an exit strategy to “cash out” and move on to the next chapter of their lives. Some buy another company as a way to grow their existing business and increase revenue. 

Whether you’re buying or selling, it’s an involved process. Here are 3 things we know with 100% certainty that will make the buy-out a success.

#1. Do your “due diligence” with Diligence.

Before you sign a contract to buy another business, make sure you and/or your accountant and/or your attorney thoroughly:

  • examine all of the other business’ books and records
  • review each contract you’ll be taking over
  • investigate every liability you’ve agreed to assume
  • examine every piece of equipment you’ll be buying
  • speak with the employees who will become part of your company
  • ask questions and get proof.

You don’t want to find out after the money has changed hands that the business the seller promised to deliver was grossly exaggerated. You don’t want to discover that the employees you just acquired don’t have the skills you need or that they create a disruptive, toxic work environment.


 #2. Pay attention to “Corporate Culture” Compatibility  

Make no mistake – one of the biggest reasons mergers fail is because of a clash of “corporate cultures”.  Be honest with yourself and trust your instincts. Don’t be blindsided by the money opportunity. If your employees are used to a formal work atmosphere, they won’t be happy working with the new folks who show up in flip flops and shorts.  Make sure there’s a good “fit” between companies.


#3.  What We’ve Got Here… is a Failure to Communicate!

A problem that can hinder the success of a merger is failure of the company leaders to communicate a clear message to the employees of the buying and selling companies about how the merger will affect them.  It’s not uncommon for the top brass  to  be so engrossed with getting the deal done, that they overlook the fact that while they know what’s going on, their employees don’t.

What the employees see happening are lots of meetings behind closed doors, outsiders reviewing stacks of books and records, strangers examining the offices, machinery and equipment. Suddenly it’s everything but business as usual. In those instances, the “unknown” can become rocket fuel for fear and speculation. Rumors can run rampant. Morale can sink. People may feel the need to find other jobs before whatever catastrophe they’re imagining happens.  

What can you do to prevent that? Communicate! 

After the contract of sale is signed and before the actual merger takes place, meet with your employees and let them know what to expect. It’s not enough that you and upper management have a great plan – everyone has to know what the plan is and be reassured of where they’ll fit in after the merger.  One conversation will not be enough.  

  • Check in with your employees from time to time to get feedback on how things are going and to offer reassurance.
  • Pay attention to their expectations and steer them back on track when they stray from your organization plan.
  • Be a confident leader.

Modify your plan if you get enough feedback that it isn’t quite working.


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Please note that this article is intended only as a general discussion and that it should not be taken as creating an attorney-client relationship or as legal advice with respect to any particular person, business or situation.  Circumstances and the applicable legal principles vary and you should consult with an attorney and/or other professionals concerning the facts of your particular situation.