A buffer zone is an important part of your merger toolbox

Transition is an intriguing topic; from old to new, from medieval to renaissance, from bankruptcy to solvency.

The topic piqued my interest when I was writing this month’s Uniquely Cleveland on the Glasshouse at the Cleveland Botanical Garden. The contrasting environments of a tropical rainforest and a desert adjoin each other, with a small room between for visitors to make the transition from an arid biome to a humid one.

That buffer zone makes the switch easier. Likewise, a transition vehicle can offer advantages during a business merger. One of our guest columnists wrote about his experience.

To retain the recognition of the other company, a transitional company was created and given a name similar to the previous one. That helped take care of the brand question, leaving the matter of current and new contracts to be resolved, along with, of course, building relationships between the two entities.

New contracts would start with the transition company while the former company stayed in existence to complete projects currently under contract and to maintain the liability for those projects.

This was necessary since contracts with existing clients can be complicated. Some clients may be unwilling to transition and cause ruffles. In fact, it may not be the best idea to discuss the situation with existing clients before the merger closes.

But by preparing a transitional company shows you are aware of potential hurdles involved with client contracts and are being proactive. It could very well keep you out of the heat.

 

Dennis Seeds is editor-at-large of Smart Business Magazine and co-author of An American Journey and Bootlegger’s Son, from Smart Business Books.