This chapter reviews the closing of the deal. The key aspect of this step is the preparation and signing of the purchase agreement and other documents needed for closing.
Beyond the legal requirements of having a purchase agreement, the preparation of the document itself is an important aspect of the due diligence process. Because of the representations and warranties a seller is obligated to vouch for, frequently, problems surface during this period that you may not otherwise uncover. For this reason, it is very important to begin work on the purchase agreement as soon as the letter of intent is signed and you begin formal due diligence.
The momentum of closing and emotions attached to it may vary substantially, depending upon the type of seller with which you are dealing. With a divesture from a large corporation, you are less likely to deal with a fear of closing. The company has strategic reasons for spinning off the particular division you are buying. On the other hand, you may not have the closing momentum and urgency that builds when dealing with the private seller.
In addition to working out details of the purchase agreement during the due diligence process, you should concurrently work on the action plan for the days and weeks after closing. Chapter 15 covers some of the key points to consider in developing such an action plan
After the Deal is closed
Once you close the deal, you need to be prepared to go in the very next morning to meet with your management team as well as your entire staff. What you do in the first days and weeks will set the tone for your relationship with your employees for some time to come, possibly even the duration of your ownership. Remember that the chief concerns of your employees and managers may be somewhat different than your own agenda. Employees will be concerned, first and foremost about their own job security and future with the company now that it is under new ownership. Management shares this concern, and may also have more narrow issues facing them in their own departments, that nevertheless they may feel requires immediate attention. An easy model to follow includes a short initial introductory meeting with management, an all-employee meeting to include all management and non-management staff, and then a third more formal meeting with management. These meetings will set in motion the planning to carry out the three objectives of the transition: addressing your key constituencies (employees, customers, suppliers and bankers), revision of the action plan, and implementation of significant changes outlined in the plan. Other meetings will follow in the first days and weeks, but it is essential to try to fit these first three meetings into the first day if at all possible. Continue reading