Financial Poise
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5 Management Responsibilities that Aid the Sales Process

Strengthen These Key Management Team Positions Before Selling the Business

Any buyer needs to understand the responsibilities of each member of the seller’s management team positions. The buyer will have a due diligence list, and information requests are part of the process that can lead to a sale. Potential buyers will want timely, accurate information.

While the business owner plays a significant role in the negotiations, having a well-developed management team with specific responsibilities and day-to-day accountability is very important, specifically during this process.

The critical question is: “Can the management team execute the business strategy once the business has been sold, absent an owner and the key managers?” The answer to this question is, hopefully, “Yes.” The test of whether an owner can honestly answer this question in the affirmative is most evident during the sale process.

Five Important Management Team Positions

There are five areas of due diligence for consideration as an owner attempts to answer the issues and questions raised during the sale process: Financial and Accounting, Sales and Marketing, Manufacturing and Service, Systems, and Overall Management.

Financial and Accounting

Does the seller have 3-5 years of audited financial statements? Are interim financial reports available (e.g., YTD and a comparison to the prior year)?

As a privately owned business, there may be adjustments that a larger organization will want to make in the ongoing business. Some adjustments may relate to auto expenses, memberships, and travel. Some of these costs will be eliminated, and closing cost adjustments will be made. All these factors go into the equation of determining the price offered to the seller.

One of the critical managers is the Treasurer/CFO function. During the sales process, the CFO should be asking:

  • How accurate are the numbers presented to the prospective buyer?
  • How reliable are the forecasts?
  • What does the sales forecast or budget show?
  • Are the forecasted numbers reliant on one or two key clients based on historical relationships with the founder/owner?
  • Are financial margins improving, or have the margins tightened?
  • Can others assume the relationships, or will the business revenue decline?
  • Can the financial team react quickly and provide projections in real-time?
  • What accounting systems are in place, and how quickly can financial reports be generated?
  • Will a new accounting system (the buyers) be integrated over time?

Sales and Marketing

If the seller/owner decides to play a limited role after the sale or have a consulting arrangement for a transition period. In that case, the new owner will want assurances that there are managers with the leadership ability to achieve operating objectives, especially in sales and marketing.

This includes internal management skills to maintain relationships with vendors and clients. These relationships can include not only the customer side of the business but also relationships with accounting, legal, and other professionals.

Retaining key managers and other employees requires compatible compensation policies and incentives to retain key employees. Communicating a change in ownership with the current employees and the marketplace is essential to ensure minimal disruption of operations.

Manufacturing and Service

Understanding the nature of the business is critical to the buyer. Is your business a manufacturing company? If so, you should consider the following questions:

  • If the business is in the manufacturing sector, how does management source raw materials and deal with commodity risk?
  • Are there synergies that can be expected once the two companies are merged?
  • Are capital expenditures looming, or is the fixed asset base (equipment, land, and machinery) up to date?

For a service business, the buyer needs additional metrics and information to assess the viability of growing the service business. How the internal management team responds to these questions can motivate or turn off a potential buyer.


In today’s digital world, the role of a CIO (Chief Information Officer) in developing a marketing and communication strategy is an essential function of the management team.

A successful merger or acquisition depends on obtaining timely and accurate information on business operations. Reviewing operating systems is critical, and keeping up with data-related technology and security issues has financial and reputational impact. A key consideration is a review of accounting and billing operating systems.

Overall Management

If the seller has an inflated price in mind, the negotiations may be a frustration to both sides of the negotiation. The seller may want to engage a financial advisor (including tax and legal advisors) to develop an independent value for the business.

A valuation may benefit the negotiations, as the seller may have a more realistic view, and the buyer understands the price is based on an impartial financial professional, distanced from the emotional connection to the business that the seller may have.

Other Management Considerations

While price is a significant factor, there may be other issues and considerations that the seller wants to have maintained once the transaction closes. The new owner may want to consolidate operations, so keeping local jobs can be important. The structure of a transaction may be critical to minimize tax issues for the seller and to deal with bonuses, profit-sharing plans, or other benefits.

Talent, Customer Relations, and Intangible Assets

The existing employees will want to maintain current benefit levels (including healthcare) and avoid significant increases in personal costs for such benefits.

In any merger, some job functions become redundant (e.g., a company does not need two treasurers). If some key managers decide not to continue under new ownership, new talent can be recruited.

Typically, a prospective buyer will ask what the current management team brings to the transaction. A team of leaders that have developed the culture within the company, with defined management responsibilities and accountability, will enhance the company’s value to buyers. If the leadership roles are centralized, it could have the opposite effect. The leadership role also extends to the market.

Relationships with customers, professional advisors, and industry knowledge are all essential for the business to continue to prosper over time under a new owner.

A critical question is how the buyer manages the acquisition—as a separate unit or a merged business. The seller may have to determine the answer to such questions as:

  • Will the corporate knowledge and personal relationships continue if the owner or other key managers depart once a transaction closes?
  • If a key manager leaves, will the revenues and return on investment materialize?
  • How will the staff react to a new owner?
  • Has management engaged with professionals to determine the value of the business based on an independent valuation?
  • Does the seller have intellectual property, trademarks, or other intangible assets that add value?
  • Does the buyer want the intangible assets as part of a strategic growth strategy?
  • Will employees have the incentive to remain and continue to work hard under new management to achieve the goals and objectives of the new company?

Is Your Management Team Ready?

The sale of a company is a complex process. Before embarking on this process and building the outside team of professionals capable of leading a successful sales process, a selling company should ask whether its internal operations and management team positions are in order.

A seller should expect that a prospective buyer will enter into the discussions and negotiations with an open mind while attempting to develop a rapport with the seller’s key managers as it assesses whether the management structure can execute without the presence of its current leaders. To this end, maintaining an honest dialogue with the management team during the negotiations can lead to a successful outcome, both for the seller and the new owners.

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[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can view at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

This is an updated version of an article originally published on April 3, 2015 and previously updated November 26, 2019.]

©2023. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.

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About Thomas Apperson

Mr. Apperson is a Managing Director of Avalon Group, Ltd., and co-head of the firm’s alternative energy and clean technology sector investment banking practice. His experience and expertise include storage technologies (such as batteries), energy efficiency, liquid fuels (biomass to ethanol), solar, water, wind, and other related technologies. Additionally, Mr. Apperson has a substantial background…

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