Preserving the identity of your company after you’ve sold it

February 13th, 2018

Our lawyer and partner Julie Doré discusses in La Presse Affaires an issue that is important to those entrepreneurs who want to ensure that the business they created continues to reflect their values after it is sold to someone else.

Selling the company they have created and watched grow to become a much larger player is an issue that comes up regularly with entrepreneurs. When, for various reasons, they have decided to sell, many want to ensure that the spirit and philosophy that characterized their company persist after a merger.

To make that happen, it is vital to discuss these priorities at the outset of any negotiation, so that the agreement between the two parties reflects the seller’s wishes as much as possible.

Julie Doré, partner and lawyer specializing in mergers and acquisitions, answers questions from La Presse Affaires to help make it clear to potential sellers what legal elements they have to take into account in discussions with potential buyers.

A priority

“Above all, it has to be a real priority and a truly important consideration for the vendor shareholder or owner. The initiative has to come from the person who is selling, for whom it must be an even greater priority than the financial considerations. From the outset, the vendor must engage in long discussions about the philosophy of the business, about what is important in ensuring its long-term survival.”

Included in the shareholders’ agreement

“The shareholders’ agreement could offer some protection. An entrepreneur who wants to keep an interest in the resulting group could negotiate powers or veto rights over such matters as changes in the operational model, the existing management team, etc.”

Or in the sales contract

“In some respects, the sales contract could offer some protection, for example, an undertaking from the buyer not to move the head office or to maintain the existing management team. These are things that can express on paper the intention of the buyer to make reasonable efforts to maintain the culture of the company being acquired.”

Success and happiness

“Generally it’s not a problem to have such documents respected for one year. Three years is a good length of time. And it’s really grounds for celebration when a buyer agrees to make commitments for a period as long as five years. But when a marriage really works, there is no limit to what can be done.”

To read the whole article (in French), click here.