It may be surprising to find an article which emphasizes the human-side of business transfer on the website of a law firm specializing in business law. A business lawyer is called to play a certain role with his clients regarding a business transfer. Is it counterintuitive for us to acknowledge that people are people? We think not!
But the business lawyer is not simply a law technician: they are a business advisor. Their intervention embraces the whole of the reality of the company. They must be able to take an objective look at any situation. They must guide their client through the meanders of the legal framework. AND they must also be sensitive to the commercial and human issues that populate the life of the company and that of the entrepreneur. For example, Nancy and Joe want their business to be taken over by their only son Neil. However, Neil wishes to attend university and pursue another career. How does the business lawyer equate the financial needs of this family into the sale price of the business, while also being empathetic towards family tension caused by their particular situation?
Challenges Faced by the Seller
The success of a business transfer depends on the ability of stakeholders to consider the human aspects of the process. It starts with the person who is selling their business. The seller is often the founder of the company, but it can also be a person who has grown the business for many years. The seller usually has a high degree of emotional commitment to their business. This same commitment usually explains the success of the company under the seller’s leadership.
For the seller, the launch of a transfer process therefore implies the beginning of a detachment on a personal and emotional level. In some cases, the seller must even reflect on what gives meaning to their life and what gives them happiness. They must not only put themselves in a state of mind that will allow them to leave the company behind, but they must also consider how they will organize their life afterwards. For many business owners, this is a nearly unfathomable position. The process of reflection has great similarities with the retirement preparation of any active person. This exercise is even more crucial for entrepreneurs, given their high degree of energy and action.
The seller’s family is often involved in the business. Whether it be the children walking to the parents’ business instead of home after school, or a sibling or a parent working full time at the business as an employee, here too we will find human issues. The prospect of the seller withdrawing from the management of the company can be a cause of insecurity for family members. Will the transfer be done inside or outside the family? Will the family unit and relationships be put at risk? How will the members of the succession be chosen?
These questions may be undermined by open or latent conflicts between family members. These complex questions and insecurities need to be taken into account in order to facilitate the transfer process and maximize the chances of success, in the interests of both the seller and the buyer. In this article, we address the means that can be put in place to manage these complex issues.
The Buyer’s Journey
The acquisition process has its own set of challenges and the buyer should be aware of some key points. What are the buyers’ strengths and weaknesses? Where do the buyers’ interests lie? What inspires their enthusiasm? What are the buyers’ passions? Is the buyer emotionally prepared to face the pressure of assuming leadership of the company? Which people will make up their support system?
In addition to knowing the answers to these questions, the buyer must be able to empathize with the seller and, if applicable, with the family involved in the ownership of the business. The challenge is even greater, as the buyer can deal with a seller who has not yet completed his own awareness. However, it is in the interest of the buyer to ensure that the transfer process is not affected by the unconscious blockages of the seller.
The Employees and Other Partners
Human issues are not limited to the seller and buyer, nor to their families. The change of control of the company will cause other changes in the company. You have to be ready to handle the change.
We must anticipate the reactions of the employees with empathy, and of course, they will go through different stages of concern. Employees need to be reassured about their future within the company. In some cases, they may experience conflicts of loyalty between the seller and the buyer. After this stage, they will need to understand the proposed changes and receive the support needed to adjust. Communication must become a top priority to alleviate the anxiety of the employees, as well as to address their concerns in a timely manner. In business transfers, it is all too easy to get caught up in the excitement of change and subsequently forget that our employees are humans too with their own families, feelings, and needs. To manage all these concerns, it will be necessary to set up a communication plan.
Other partners may need reassurance. Think about the customers and suppliers of the company. Again, the buyer, and sometimes the seller, will have to show empathy to ensure transfer success.
Experts and Resources
In order to properly manage the human aspects of business transfer, consider the resources and experts available to you. The Business Transfer Center (CTEQ) offers support to sellers and buyers. It is possible to consult the CTEQ website (in French) at the following website: https://ctequebec.com/
Many experts offer support to sellers, buyers and families in business. Psychologists, organizational development consultants and human resources specialists provide services to manage certain human aspects of a business transfer. It is also possible to call on a business lawyer specializing in business transfer or commercial mediation. The advantage of having a business lawyer is that he or she can consider all the upcoming issues and provide the means to bring about durable solutions. You will find experts specialized in business transfers (resources in French) using the index at the following website: https://www.ctequebec.com/lindex/