In small and medium-sized enterprise (SME) acquisitions, the transition of management is often one of the most underrated levers of value preservation and post-deal success. In this article, we explore why retaining the seller/ founder for a defined period is essential — and equally why a well-planned exit and hand-over to the buyer (or a successor) is indispensable.
Why the Founder/Owner’s Continued Involvement Matters
In an SME, the owner-founder usually does far more than set the strategy: they are embedded in the operations, customer relationships, key suppliers, culture, sometimes even day-to-day decisions. Without their presence, continuity may suffer.
Ensuring the founder stays for a reasonable transition period helps mitigate key risks: loss of institutional knowledge, disruption to staff or customers, and a drop in morale.
From a buyer’s standpoint, such a transition period provides a bridge: it buys time to understand the business, validate assumptions, and maintain stability while initial synergies and integration plans are shaped.
From a seller’s viewpoint, staying on ensures that the business is handed over in good shape, reputation is preserved, and the value created to date is respected.
Practical tip: define clear roles and responsibilities for the founder during that transition period; perhaps shift the founder’s role from “doer” to “advisor/mentor” to avoid overlap with incoming management.
Why the Seller Must Prepare for a Smooth Exit
Preparation begins before the sale process: one of the most valuable signals to a buyer is a business that is less dependent on the founder. Over-dependence attracts risk premia and reduces buyer confidence.
Key preparation actions for the seller:
- Delegate operational tasks and decision-making to a capable management team.
- Formalize processes, document workflows, and reduce bottlenecks tied to the founder.
- Appoint or recruit a successor or at least a deputy – someone who can pick up the reins post-closing.
- Incentivize key managers (e.g., retention bonuses) so they stay through transition and with the new owner.
Communicate openly with staff and customers about continuity plans to preserve morale and confidence.
In doing so, the seller enhances not only the saleability of the business but also helps protect value for both the seller and buyer. The smoother the hand-over, the lower the integration risk and the higher the likelihood of achievement of post-acquisition targets.
Buyer’s Perspective: Why the Seller Should Stay, But Not Forever
From a buyer’s viewpoint, it is wise to ask for the seller to remain on board—but only for a reasonable period, aligned with: the business complexity, degree of founder involvement, integration risk, and the buyer’s readiness to quickly assume control.
Key considerations favoring a defined transition:
- The seller may be in “exit mode” — by nature, less motivated to invest in ambitious growth initiatives; their mindset may be oriented toward retirement rather than scaling the company.
- The seller may have already done “their job” — they built the business, but may not be the person who can take it to the next level (e.g., international expansion, digital transformation, roll-out of new products).
- A fresh successor or buyer-appointed CEO can bring new ideas, energy and focus to growth, change management and synergies (especially if the buyer owns other businesses and wants to integrate teams/processes/products).
- The buyer or his/her CEO may have a broader corporate ecosystem: the seller may lack knowledge of the buyer’s other businesses, so the successor can more easily steer merger/integration of operations, shared services, cross-selling, etc.
- From a structuring point of view: the transition period should be clearly documented, involve performance or engagement milestones, and include termination, remuneration and retention incentives.
- After the agreed period, the buyer should rapidly assume full operational control. This offers clarity to staff, customers and suppliers; prevents ambiguity about who is truly responsible; and empowers the new leadership to move aggressively on the growth agenda.
Additional Considerations to Make the Transition a Success
- Cultural alignment: Even if the founder stays for a period, the cultural shift that often accompanies a new owner must be managed. The founder can act as cultural ambassador.
- Governance and KPIs: Establish clear governance (e.g., board or steering committee), define KPIs for the transition period (and beyond).
- Integration vs. autonomy: Decide early whether the acquired business will be tightly integrated into the buyer’s group or operate with autonomy. This decision affects how long the founder should stay and what role they should play.
- Communication plan: Communicate the transition plan to employees, customers, key suppliers. Having the founder present for this period provides credibility and reassurance.
- Succession planning: If a successor is appointed, ensure proper hand‐over, training and overlap with the founder. A clean “fade out” is better than a messy “fade away”.
- Exit clause: Even within the transition period, build in flexibility: if the founder leaves early (for whatever reason), the buyer must have contingency arrangements (e.g., earn-out protections, escrow funds, retention of key managers).
- Value realization: The transition period is also a window for the buyer to crystallize value — e.g., launch new initiatives, build growth momentum while the founder supports continuity.
For SME deals, the human capital transaction is just as important as the financial and operational one. Ensuring the founder stays for a defined period is a prudent investment in continuity. However, the real value creation often begins when the buyer (or their chosen successor) takes full control and drives the business forward. A thoughtful transition plan, clear milestones, and alignment of incentives on both sides can significantly increase the probability of post-acquisition success.
At Advisory34, we support both sellers preparing for exit and buyers executing acquisition projects, with a keen eye on transition risk and management continuity. Get in touch if you’d like to explore how to structure the management hand-over in your next transaction.
