To our readers: "Big Deals" columnist Michael Collins and his panelists at the ProSales 100 Conference's M&A session got so many questions that they didn't have time to answer all of them. So we've launched a new periodic column, "Ask Big Deals," in which Mike will begin by answering some of those questions. Do you have a query of your own for Mike? Write to him at [email protected].

Q: How do buyers view a prospective acquisition in which the owner wants to leave but there’s no internal succession plan?

A: Ideally, an owner would be available for a transition of one to three years, depending on how integral they are to the operation and at winning new business from customers. For transition periods shorter than that, the more critical the selling owner is to the business, the more likely a short transition will have a negative impact on valuation.

Regardless of the timing of the owner’s departure, someone must step in to fill that gap. Buyers always determine the post-transaction plans of owners and senior managers during their initial due diligence. If there’s no heir apparent, the buyer can decide when to tap their own network of executives or bring in a recruiter to hire a replacement from outside.

Ideally, the replacement manager would have some period of time to work alongside the existing senior manager to ensure a smooth transition. Failure to accommodate that type of dovetail transition can hurt the business’s valuation.