Alicia Goodrow, a partner in our Houston office, was interviewed for an Associated Press article that was recently published in the New York Times.

Owners should expect the unexpected when buying a business

By JOYCE M. ROSENBERG Associated Press
March 27, 2019

NEW YORK — Many small business owners get some unpleasant surprises when they buy a company, whether the problems are with staffers, finances or the firm’s technology, equipment or premises.

Expect the unexpected is the advice from small business consultants, including those who have bought and sold companies themselves.

“You always get surprises after the deal is closed, and sometimes they’re significant,” says Gene Marks, owner of The Marks Group, a small business consulting firm in Bala Cynwyd, Pennsylvania.

Owners should always do due diligence before buying a company, looking as closely as they can at finances, staffing, customers and vendors. But, Marks says, remember that you’ll miss something or that the owner who wants to close the deal may not be up-front about everything.

“You find out a lot more about a company after you bought it,” Marks says.

As they do their due diligence, owners should remember that like the stock market, a company’s past performance is no guarantee of how it will do in the future. The focus needs to be on how many changes are needed going forward.

The timing of a transaction can affect how smoothly the transition goes. Sellers often want to close a deal by Dec. 31, and that can mean rushing to get things done and making mistakes rather than having a smooth transition, says Alicia Goodrow, a business law attorney with Culhane Meadows in Houston. She suggests buyers not be bound by the calendar so they can take their time.

It’s important to remember that employees are a company’s most important asset, Marks says. “The companies that have succeeded the most when they’ve been acquired are the ones where the new owner has communicated with key employees and gotten them on board,” he says.

The new owners should try to keep the seller involved in the business; the best way is to make them a paid consultant or even a staffer. Having the previous owner assist with the transition can help staffers get used to the new boss, and reassure customers and vendors that their needs will continue to be met.