Here is the second half of our article to help you build strong governance at all levels, for a smooth business transfer!
4. Create a Transfer Management Team
One of the main obstacles to a business transfer is the proximity of the transferor’s person to the value of the business. In many cases, the business owner is both the main salesperson, the production manager, and the only contact with suppliers and strategic partners. They often hold the loyalty of key employees as well. A potential buyer will have – founded – fears that the value of the company will go up in smoke once its former owner has left.
To overcome this, it is important to give the company an objective existence distinct from its owner. By setting up a management team made up of key employees, the transferor creates conditions that will make it easier to transfer their business and allow them to obtain a better price.
5. Provide the company with a Planning Committee for the transfer process
The entrepreneur getting ready for a company succession should set up a committee to prepare the transfer process. Such a committee allows the person selling the business to divide the work to be done. It also maximizes the chances of successful transfer.
A planning committee could prove useful when a succession takes place within a family business or a regular business. Even when considering selling the business to third parties, it is advisable to set up such a committee, especially to prepare for the inevitable stage of due diligence.
6. Create a Transition Committee
If the planning committee originates from the transferor, the transition committee will be more responsive to the needs of the buyer. It is not uncommon for both committees to be made up of the same people. However, we must distinguish the role of each.
The transition committee aims to manage the implementation of the transfer. The change of control implies changes for the organization that should be supervised.
Some buyers will want to implement profound changes in the operations of the company as soon as the transfer takes effect. Others will want to give themselves time to evaluate the capabilities of the team in place before making any changes. Be that as it may, employees, suppliers, creditors, customers and other strategic partners of the company will have concerns that will need to be addressed.
The creation of a transition committee makes it possible to design an appropriate communication strategy and see it implemented. It also makes it possible to list the actions to be taken during the first hours and the first days following the transition and to make sure that no step has been forgotten.
7. Good governance begins with senior management
The establishment of committees does not mean that the main owners and managers of the company can take a backseat in the transfer process. On the contrary, their leadership becomes more necessary than ever.
In turn, and sometimes collaboratively, the transferor and the buyer must provide this leadership. It can sometimes be difficult to know which modes of governance need to be put in place, or how to make them work properly. In such situations, both the transferor and the buyer will benefit from the consult of a business lawyer. Thanks to their knowledge of the transfer process, a business lawyer will be able to provide the appropriate advice to make the transfer a success.