We are in the 11th hour of purchasing a small business. Throughout the due diligence process the seller has been hyper-paranoid about his employees (whom are in their 60s and 70s) catching wind of the sale, so we have had to access the property only after business hours. Even after the Purchase Agreement has been signed he is STILL very squirrely about his employees finding out. (1) is this normal? (2) any obvious red flags?
Note: seller is hands-off and remote. Employees operate the day-to-day.
Not unusual but still worth keeping in mind a few things. From what I’ve seen, the biggest risk is that the employees will not want to work with a new owner so will leave fairly soon after they find out the business is being sold. So for your own protection, you need to have a very good understanding of what could happen if you buy the business and immediately have no employees. Would that be fatal or not? If so, then you need to have provisions in the agreement for how a transition happens if you’re not allowed to assess risk of employee loss.
Excellent advice and why I ended up sticking to real estate. Even if a house burns to the ground you can collect insurance and be made mostly whole.
But on the Monday morning after you buy a business, if nobody shows up to work, game over man. It’s scary.
This rarely happens. Sure there’s going to be some nervousness on the part of the employees, but usually they make the transition just fine. And change can be a good thing, it’s not always a negative experience.
If the employees are in their 60s and 70s, I highly doubt they will leave for a new job. They know they aren’t likely to get hired elsewhere due to their age. The owner may feel very guilty about that and that’s why he doesn’t want them to know about the sale.