Whether you’re considering selling or acquiring, it’s important that you plan carefully – consider your options, determine the challenges, obstacles and potential roadblocks and build your strategy.
All of this should all come together in your transition plan.
From the buyer’s perspective, the impact of a new acquisition/merger should be fully factored into the current business – how will it affect financials, clients and staff? How easily will the two businesses integrate in terms of culture, products, investment philosophy, platforms, software, fee structures and so on?
From the seller’s perspective: the sooner you create your plan, the better. This is especially true with multi-principal businesses, where the absence of such a plan could cause unnecessary hardship for the remaining principals and their families.
An effective transition plan will:
- Provide the roadmap for both seller and buyer. And, in doing so, it will give comfort and confidence to all parties that they have a plan that will work.
- Identify the key milestones (KPIs) along the way, with possible incentive payments for achieving them.
- Identify the potential roadblocks to a successful transition, and hopefully explain how they can be avoided.
- Allow the buyer to determine their level of capacity/capability. Do they actually have the resources in place? What will be needed to optimise the chances for a successful transition?
- Provide the financing party with confidence that the borrower has a well-thought-out approach and plan.
Here are the specific areas a transition plan should address:
The objective should be to ensure that both businesses will continue serving their clients with the same standards of service, support and advice after the transition is complete.
The name of the game is to reduce reliance on any one person (which is usually the principal/vendor). Development of multiple relationships (team-based) is an important objective of any business transition plan.
People are the most important element in any successful transition. Here are 10 strategies that will contribute to a successful transition:
- Know what you’re getting in terms of people and culture – a “cultural assessment,” if you will – before finalising the merger. Sometimes you just can’t fit square pegs into round holes!
- Never assume. Always be on the lookout for early warning signs that the merger isn’t going to plan. For example: poor participation, “no-shows” for meetings and events and so on.
- At the time of the announcement, hold an “all staff” meeting to introduce everyone (from both buyer and seller’s teams), explain the rationale and the expectations for its success. Encourage questions.
- Make the time for one-on-ones with staff – both old and new. A “how are you feeling” call or coffee can work wonders.
- Schedule training to bring people up to speed with new systems, standards, policies and even the language used. Use teams drawn from both sides to address specific areas and share knowledge and ideas.
- Communication is an absolute must and should be regular and relevant. Simply explaining what the changes will be is not enough; people need to know why they will be implemented. These work:
- Regular staff updates on how the practice is tracking towards its key integration goals and projects (CRM, service offers, fee structure and so on).
- “State of the nation”/”town halls,” held at least annually, allow the business to update staff on the bigger picture, discuss future outlook and field questions with a Q&A session.
Team events bring the whole team together. This can be the perfect platform for training, team building, celebrating and acknowledging important milestones and achievements. (And, yes, even a little fun.) There are costs involved, but it may be far less expensive than the cost of replacing staff who decide to leave.
Ensure everyone (from both tribes) has role clarity with an up-to-date PD which clearly addresses goals and objectives.
If someone isn’t working out, act quickly. Don’t risk lingering animosity and a deleterious hit to team morale.
Regularly checking with staff through an annual staff survey will allow you to tap into any prevailing sentiments and get ahead of any lingering post-merger issues.
This part of the plan focuses on the transfer of the business in the legal sense. For example, it must cover:
- Business value (basis and date of the most recent valuation etc.)
- Ownership structure
- Funding (finance provider, terms of the loan etc.)
- Purchase structure (time period, phase-in periods, payment terms, “go/no go” hurdles)
- Risk and the forecast return on the investment required
This part is about you: have you considered the personal implications of your decision (whether you’re buying or selling)? If you’re leaving, how will you spend your time on a day-to-day basis? Do you expect to have any ongoing role in the practice?
If you’re looking to buy or merge, there are also personal considerations. Your role may change and involve more managing – you may spend more time mentoring and less time advising, for example.
Transition planning is an important consideration for all businesses, and every owner owes it to themselves – not to mention their business partners, colleagues and families – to have a properly-constructed transition plan in place.
