Existing owner has one year contract, but wants to do it their way…

This topic contains 3 replies, has 4 voices, and was last updated by  Gina Miele 2 weeks, 5 days ago.

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  • #112525

    How would you handle a situation in which the owner(s) of the company that is acquired, has a contract to stay on board for at least one year, however not only refuses to help with the integration transition, but purposely continues to do it their way, the “right way” according to them? This has been a theme in multiple acquisitions that I’ve been part of, and has dramatically slowed the integration process down. What options do you feel are available in this type of situation?

    #112703

    Denise Gingolaski
    Participant

    Hi Gary – I have seen a version of that too in my company’s acquisitions. These owners feel that the company is still theirs, but they were paid to give it up. It might be too late for any current issues, but in the contract, it should be stipulated that the former owner has to do “x” “y” “z” and if they don’t, then they will be let go sooner than the contract.

    For current situations, you could just pay them for the rest of the contract, and let them go early. If they are getting a salary for the year, just pay it to them and let them go. It will end up being more cost effective then dragging out the integration.

    Our company has also not had prior owners stay for more than a month or so. The former owners really hamper the new culture you’re trying to build with the employees that are staying.

    Denise

    #112969

    stacy hall
    Participant

    I am not surprised this type of situation occurs even when it is a friendly acquisition. I would imagine it being hard to ‘let go’ of the control to some degree. I would encourage, before contract is negotiating, this be part of the due diligence process where by you lay out all the factors and/or conditions of the role post-merger when you keep prior owner(s) in a binding, year-long contract. I do agree with the post above, pay the contract out and let them go if feasible.

    #113074

    Gina Miele
    Participant

    This is a situation we encountered with our first acquisition. The differences in opinion led to many negative situations surrounding all aspects of the integration process. The damage that was done in the one year period of time encompassing the previous owner’s contract led to 100% employee turnover at the acquisition site. I agree wholeheartedly with Denise, and would recommend paying for the rest of the contract and letting the previous owner go early. Once these cultural differences begin to directly influence the integration, it is generally a good idea to go separate ways.

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