There you are the next morning: sitting at your desk in your director's office for the first time. Full of future plans and motivated to the bone. The past period has been tough and exciting, with the visit to the notary as the highlight. After many months, entrepreneurship can finally begin!
Your first task after buying a business is clear. On the first day, you will have to inform everyone of the acquisition. You use the first 100 days primarily to get to know the business better, make sure employees and customers stay on board, and execute your post-acquisition plan:
- The post-acquisition plan
- Inform staff
- Inform customers and suppliers
- Inform media
- Relationship with the seller
- Perform better
Business acquisitions are always shrouded in mists; few are aware of the negotiations. Once the acquisition is complete, you will need to announce this to the outside world in a well-directed way. Key relationships want to hear this news directly from the seller, not via-via. To avoid damage, prepare the announcement well together.
1. The post-acquisition plan
As a buyer, you are full of plans for product innovation, marketing campaigns, sales programs, cost savings, international expansion and whatnot. In practice, however, in the first few months you will have little time to do this, because internal matters demand all your attention: talking to employees, reading up on and becoming familiar with the business and the industry, putting the automation in order, or arranging legal and tax matters.
An additional problem, especially for MBIs who have a life at a multinational behind them, is that there is little to delegate in a business with 12 employees. You'll have to do it all yourself, right down to ordering a new printer. And that all takes time, a lot of time.
It is wise to create order out of chaos. Take out your business plan again. Which things do you need to get started on right away and which can wait a while? Pull out the due diligence report. This lists all the business's weaknesses. Some issues will need to be fixed immediately, such as omissions in employment contracts, filing unregistered brand names or settling old debtors. The same goes for applying for a fiscal unity for your holding company and the operating company, and firing employees. The latter is best set in motion immediately; it will prevent uncertainty among staff.
In short, there is plenty of work to do. Sit back, make a priority list and create an action plan based on that list. Even better, have this post-acquisition plan ready before your first day of work. That saves time and you are less likely to be distracted by the issues of the day.
Only after these urgent matters are taken care of is it time for bigger and structural changes. The advantage is that by now you know and understand the business better. That makes the likelihood of overly impulsive and damaging decisions much less likely. You have also gotten to know the staff better by now, so now is also the time to rearrange functions and tasks where necessary.
Many employees are reluctant to make changes. That's no reason not to make the changes, but it is wise to involve your staff in important matters. First, because you can learn from them - some may have been working for the business for 10 years - but also for creating support. People will feel valued and are therefore more likely to go along with the change and come up with new ideas themselves. Moreover, it makes unpopular measures more likely to be accepted. For example, the old owner allowed staff to work black on the weekends with the boss's equipment, while you are opposed to this as a matter of principle. It's a bitter pill for your people, but by investing in a good relationship, the effect on motivation will be less.
Don't underestimate this aspect. Acquisitions in SMEs sometimes fail simply because the new owner is not accepted by the staff. Motivation drops, people walk the walk, and in the meantime you are pulling a dead horse. So much for your fine projections....
2. Inform staff
Often the staff is not aware of the acquisition until the signatures are in place, except for a few key staff members who have already been spoken to by the buyer prior. It is wise to convene the staff the morning after the acquisition and speak to the staff with the seller.
The seller has the space to deliver the big news, explain his considerations and thank the staff for their efforts. Also, he can introduce you as the capable entrepreneur taking over from him. Then you can talk a little about your background, your motivation for taking over the business, and your plans for the company.
If possible, organize the meeting on Monday morning and not on Friday afternoon: a lot can be broken in a weekend via the mutual fanfare. Starting Monday morning, you'll be there all week to answer questions and put out fires yourself.
Regardless, employees will be overwhelmed by the meeting. They are full of questions and will want answers to them as soon as possible. Staff questions are obvious. Will there be layoffs? Will the business remain in its current form or will certain operations be discontinued? Will the business remain in its current location? It is wise to provide clarity as soon as possible. Don't make false promises, because you will be judged for that later. If you know there will be layoffs, indicate this, and say that you will provide clarity as soon as possible. Keep a realistic story, but do not show the back of your tongue.
Not everyone dares to ask their questions publicly. Therefore, draw up a list of the most important questions and answers and give these to the employees in writing. That way they can read through the list at their leisure and discuss it with the home front. Mention that if they still have questions, your door is always open.
It's a huge cliché, but your staff is really your most important asset. If tomorrow your employees walk out the door, you will be left with four walls and nothing else. Therefore, invest in the relationship with your employees from the very first moment. Start with an introduction round, in which you have a short conversation with each employee. This way you not only get to know each other better, but also the business. Employees can explain to you the strengths and weaknesses of the business, where opportunities lie and also what their personal qualities and desires are. Through these conversations, you also get an insight into the company culture. How open are the employees? Are they motivated? What is the mentality of the staff? And also: how do they view the previous owner?
3. Inform customers and suppliers
Together with the salesperson, make a tour of key customers. Especially in SMEs, customers often have a personal relationship with the owner; they may have been doing business with each other for 10 or 20 years. During a personal visit, you can get to know the customers and the salesperson can put in a good word for you. This stamp of approval reduces the chances of customers walking away after the acquisition. State what your plans are for the business, but at least emphasize the continuity of the business.
Prepare customer visits well. Especially if the world is small and customers know each other, news spreads quickly. Customers who hear the news from someone else may feel passed over. Divide customers into different customer groups in advance, make an appointment with these businesses and don't tell the reason for the visit yet. Then create a roadmap and visit certain customer groups on the same day. This way, no one will feel that they are less important.
4. Inform media
Once staff and key customers and suppliers have been notified, it's time to notify the outside world. This is a matter that concerns both the seller and the buyer. Therefore, discuss with the seller how to go about this. For example, you can send a press release to the trade press and the (local) media or send a mailing to your relations.
It's important that you speak with one voice: both bring out the same message. For the buyer, the acquisition will have to do with "synergy benefits," "a strategic move" or "a long-held desire. The seller will want to avoid the vulgar word "cashing in" and emphasize "taking on new challenges," "securing the future of the business," or words to that effect.
5. Relationship with seller
Because, somewhat by necessity, a phased acquisition is increasingly the only solution for the seller to sell a business, he is also increasingly staying on board as a shareholder. But even if you take over the business in its entirety and pay off the entire amount at once, it is wise to negotiate a "familiarisation period" from the seller.
Sometimes this is formally arranged in an advisory agreement, sometimes loose agreements are made about it. In any case, make sure that the seller introduces you to important relations and that he transfers his knowledge to you. Such a salesman obviously knows all sorts of things - about production, marketing, the staff, backgrounds about customers and suppliers, failed foreign adventures - it is a shame not to make use of it. Moreover, salespeople often like to stay connected to "their" business for a while and share their knowledge. Respect each other's competencies. If the salesperson is an experienced technician and you have a sales background, it is not useful to sit in each other's chairs. Therefore, make good agreements about the role the salesperson performs and how often they come over.
So much for the positive side of the story. The reality, in fact, is a lot more unruly. During the acquisition process the atmosphere was still great, it really clicked with the seller, you thought, but after the deal the irritations quickly run high. Many buyers have all kinds of plans for the business. They are going to shake up the business: sales will become more professional and aggressive, marketing will finally be done and automation will be modernized. Not every salesperson "pulls" this off. He thinks all these changes are nonsense, because the business has always functioned fine, right? It irritates him that the buyer thinks he knows better. Why doesn't he listen to his advice? Even the staff suddenly look at him differently: they don't know how to behave. He is still around, but his loyalty has shifted to the new owner.
In short, the seller may soon feel displaced in their own business. If then business conflicts also arise between buyer and seller, for example, because there is trouble over warranties - the inventory turns out to be overvalued or the machinery turns out to be poorly maintained - then the partnership is quickly finished. What seemed to be the beginning of a friendship at the closing dinner regularly ends in a quarrel, sometimes even in court. Advisers know this. That's why they advise keeping the transfer period as short as possible and at least not giving the seller any shares. That said, cooperation between buyer and seller is sometimes excellent, but unfortunately this is the exception rather than the rule.
6. Perform better
But let's end on a positive note. In fact, research shows that of all SMB businesses that are acquired, as many as 70% perform better post-acquisition than before. Let that be a hopeful thought. Good luck!
