Hatchet Job

A friend of mine was fired last week.  Nothing unusual, given the current economic climate unless you consider that he was terminated from his own company.

“B” started the business several years ago.  As time passed, his company prospered and he was able to open a second office and then a third.  Later this year, he successfully sold his business to another company with the understanding that he, along with his employees would continue working at his newly acquired company.

I don’t rep him and don’t know any of the particulars of his deal which leaves me free to speculate about it here.

Buyers frequently require that founders remain with an acquired company for a period of time as a condition of purchase. Aside from assets and revenues, often what a buyer is buying is the founders’ good will, business relationships and brain trust. So it’s good business for the founders to continue working with the company after it’s acquired by someone else. Unfortunately, it’s been my experience that such arrangements rarely if ever work in practice because of a clash of cultures and a fundamental mismanagement of each party’s expectations.

1. Founders hate “working for the Man.” That’s why they went off on their own in the first place. Founders are by definition entrepreneurial so they naturally resist taking cues from someone else about how to run – what was until recently – their own company.

2. Buyers want the entrepreneurial benefits of independent thinking without its costs which can be based on erratic, random and emotional factors.

3. Founders take risks; they execute. Gut feelings can outweigh financial and legal risks. (See #2 above). However, they can be horrible team players especially when they’re no longer the quarterback. (See #1 above).

4. Buyers tend to be more organized and institutionalized. They tend to integrate uniform and consistent protocols ranging from hiring practices to the brand of coffee in the break room.

I like to think that both parties have only the best of intentions about working together but it behooves everyone to plan well (and negotiate accordingly) for divorce prior to taking any merger vows.

  • Ouch. This must feel like being fired out of the family by your own child.

  • Good advice.

    • Approve

      Sent wirelessly via handheld, so pardon any terseness or typos.

      Peter L. Kaufman
      Kaufman Entertainment Law Group, PC
      (310) 294-1624 | (818) 224-2449

  • K Stephens

    The sound advice in my experience ( and trust me, you don't want me to verify) is SELL OUT….GET OUT…prefrebably with a very short NON-COMPETE clause.

  • K Stephens

    The sound advice in my experience ( and trust me, you don't want me to verify) is SELL OUT….GET OUT…prefrebably with a very short NON-COMPETE clause.