Cleaning Up After Closing – 7 Examples
Many sellers are surprised how much they are engaged after the closing of the transaction. Isn’t the closing the end of the transaction? The simple answer is that the closing takes place at an arbitrary point in time (e.g. the last day of the month to facilitate a payroll transaction), but there are almost always future adjustments.
Here are some examples:
- Receivables collection – if the receivables up to closing belong to the seller by agreement, there is always a time period for accounting and collection post-closing.
- P&L adjustment – whether with working capital or other items some adjustments may be necessary.
- Lease transfers – it is not uncommon that adjustments in leases with new signatures may be needed after closing.
- Employee/supervision issues – while sellers may simply refuse to be involved, a buyer may approach the seller about a specific HR issue post-closing, especially if litigation is involved.
- Contract transfers – on occasion there be a glitch in a contract transfer post-closing due to some unanticipated regulatory issue, and the buyer may request seller assistance.
- General consultation – purchase agreements often generally refer to consultation to be provided by the seller for a limited period of time. There are circumstances when this could become critical if major issues arise for the buyer.
- Everything else – good transactions are based on trust and usually the seller will be asked for some assistance to increase the buyer’s understanding of their acquisition.
As a seller you may consider the above and ask, “Do I really have to deal with these issues?” The answer may be “yes” or “no” based on your purchase agreement and most sellers want their former business to thrive. Generally, a little assistance is good karma.