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BUYER MEETS EMPLOYEES BEFORE THE CLOSE - MISTAKE OR NOT?

Apr 30, 2014
Article #248
Author: Mel Jones

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As a broker, my job is to reduce the risk of a deal failing by removing what I refer to as wild cards from the deck. One such wild card is the personalities between the employees and the new buyer and all the risks that come with such meetings. But inevitably during the deal the buyer may insist on meeting the employees. 

It is to the benefit of both the seller and buyer that this meeting happen after the deal closes. 

Clearly the seller has little interest in allowing such a meeting to take place. But a buyer tends to not understand the risks involved and tends to want to just jump in.  

BUYER RISKS OF MEETING EMPLOYEES

There are several risks of meeting the employees before the deal closes. First, it gives the employees time to find another job before meeting and getting to know you. Employees often live pay check to pay check and when change comes they tend to run from unknown to find a known. The first ones to leave are the valuable employees and perhaps even the key management position such as a chef or general manager.

Second, it places confusion in the ranks of the troops.  Who is the boss?  Often a buyer may want to interview the employees and things are said to the buyer that may or may not be true, throwing the deal off the tracks. Remember, the troops are in survival mode, and anything they can do to keep the current boss, they may do.  Don't underestimate the hearts of the employees. 

Finally, all this places stress and risk on all parties of the deal, buyer, seller and even the broker.  Should the deal fail, suddenly the buyer and seller who were best friends are now enemies and the seller is blaming the buyer for the departure of employees or worse yet for the disruption to the business. We've now entered the world of law suit. 

REAL STORY OF BUYER MEETING EMPLOYEES

In a recent deal, the buyer wanted to run the whole show and avoid any advise from me. He was an attorney, you know, the smartest people on the face of the earth type. He jump into the deal fast and furious. He insisted on getting to all the employees. The seller gave in against my advise. The buyer interviewed each employee. Different stories were flying around. The buyer insisted on getting access to daily information and having access to key employees on a daily basis. It even got so bad that the buyer hired a general manager for the restaurant for the seller. 

As fate had it, the deal blew-up.  And the threat of law suits were flying from all sides. Thank God the deal was settled, but the deal failed to close.

So if you're a buyer and you're insisting on getting to the employees, be aware of your risks because the chances are your injection into the employee pool may end up turning red on you and the deal failing. 

                                                                                                                                                                                                                                                       

We at SellingRestaurants feel obligated to educate the public, our customers and our clients with information that can help them make more intelligent buying and selling decisions. 

Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry.  Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer.  Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world.  There he participated in more than $11.5 billion of merger and acquisition transactions.  He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attened Law School at Gonzaga University.  Give Mel a call at 480.274.7000 or e-mail him at [email protected] if you have any questions. 

 


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