A strategic buyer will usually seek to acquire 100 per cent of a business to help grow its own operations, expand its market share or gain access to new technologies, products or customer segments.
But how long might you be involved after the deal completes? As the founder of an acquired business, your ongoing position will depend on the nature of the industry your business operates in and your existing role within it. It could be anywhere from an immediate exit to a few years.
Industry sector
Fundamentally, a buyer will require a founder to remain in position as long as they are serving the needs of the ownership transition. The buyer is seeking to ensure the value of what they have acquired does not dissipate during this process.
There are certain industries where the value of a business can be less dependent on any one individual. For example, within software, where a large proportion of the underlying value sits within the technology and intellectual property, founders can often find it easier to agree a short period of transition or even an immediate exit.
It could be anywhere from an immediate exit to a few years.
People-dependent businesses, including professional services (think law firms or consultancies), are at the other end of the spectrum. Much of the value of these businesses sits with the senior leadership who are often still major “fee generators” due to the client relationships they maintain. It is thus rare to see founders and senior leaders depart these businesses immediately.
Role of the founder
If, at the point of transaction, a founder can provide evidence they play little-to-no role in the business or its ongoing value, a strategic buyer will be open to an earlier, even immediate, exit.
Alternatively, if the founder is heavily involved in the ongoing operation of a business, or cannot evidence otherwise, the period of transition may need to be extended. This will depend on the needs of the buyer. A founder, in this instance, may be expected to maintain a role for one-to-three years, with an average of two.
The buyer will seek to understand what a founder is contributing to a business. Are they responsible for senior customer relationships, will they take them elsewhere? In this case, the role is less about technical know-how or leadership, and more focused on the presence of the founder in the market. All important things for a buyer to kick the tyres on through due diligence...
Knowledge
We don't hide behind jargon and complexity. Instead, we aim to open up the black box of M&A, illuminating the path with clear insight, simplifying the process, and delivering valuable information.
