Key Man Insurance

Key Man Insurance

 

The deal was almost done.  The owner was asked if he has prepared his key man for the transaction.  Specifically, he was asked if he had promised the key man a bonus for sticking around for 12 months to make sure that the new corporate owners would transition well into the client base and management team. 

 

This was a rich deal for the owner.  The owner assured us that he had generously compensated his key man.

 

Days before the transaction was to close the key man quit and moved across the street to another plating company.  The owner had thought our concerns overblown and had in fact done nothing to incentivize his key man. 

 

This deal fell out of bed with a non retrievable thump.

 

Tightness of wallet cost this seller millions of dollars (and nearly a heart attack) when his deal collapsed when the key man left.

 

In trying to patch up the transaction and talking with the key man, I discovered that he would have been happy with a small amount of money and a little more title but he was felt damaged by being treated like part of the woodwork.   Due diligence is more than validating the numbers. 

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Family M & A Issues

 

 

or, Drugs In The Workplace

 

 

Bob almost gave his entire business and estate to a cocaine addict. 

 

Blood is thicker than water, and this can make us thick in our thinking.  The good news is that dad changed his mind and did not leave his business to his son, mostly because the key employees had the chance to express their views. 

 

Dad was forced to deal with the grim reality that his son had stolen large sums of money from him when dad let the son operate the company during his hospitalization.  Dad also discovered that the smart and loyal long time employees actually hated the drug using son and would quit if he were the CEO/president.  Dad put the company up for sale and died a short time after it sold. 

 

The company was sold to a high bidder, and the owners wife was set for life after the sale. The son was allowed a significant sum to start his own business.  It all worked out in the end.

 

Close call.

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