Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

February 12, 2018

Post-Closing Business Seller Liabilities When Transferring A Company

By Jeremy Albelda


Approximately 8 out of 10 businesses fail within the first 18 months; only 4% make it to $1M in revenue and only 0.4% to $10M, according to Forbes. Thus, for any business owner having succeeded among the 500,000+ businesses started each year and come to the point where they are ready to sell is an impressive feat.

But, while managing and then transferring a business is a matter in itself, the life for the owner post-closing is quite a different challenge.

Post-closing, life will be without the same challenges as running a daily business – even though it is ‘very lonely at the top’ for many entrepreneurs.  Short of re-investing into a new venture, gone is the need for great leadership over large teams.

And often the skillset of a great business leader does not transfer to social settings or other tasks. Furthermore, the influx of a considerable amount of money can become quite isolating for some as well.

“Despite the aforementioned, many business owners are ‘burnt out’ after fifteen to twenty years,” says Achim Neumann, President, A Neumann & Associates, LLC, a New Jersey based Mergers & Acquisitions Advisory firm, “and simply want ‘out’. They often approach us to put a team of transaction attorneys, CPAs and M&A experts together to facilitate a business transfer in an efficient, confidential manner.”

One key consideration in every business transfer is the post-closing liability for the Business seller. Naturally, every buyer will attempt NOT to assume any liabilities, and likewise for a seller who won’t want to continue carrying liabilities.

For example, this can include explicit liabilities such as product or service warranties, customer pre-payments, vendor payments, environmental or tax liabilities. Hidden liabilities exist as well, such as a negative change in customer structure, pending competitor pricing pressures, or endangered supply routes.

It’s important that ALL knowable liabilities are clearly disclosed and allocated to the party assuming (or retaining) to avoid any post-closing litigation. Very often, such assignment is a negotiation of ‘give and take’ among the respective attorneys of either party during the Definitive Agreement formulation, but it can sometimes be resolved in the early stages during the deal negotiation phase by the M&A advisor (at much less cost).

Often, a part of the liabilities transfer can be avoided by structuring a deal as an asset sale, whereas the business buyer creates a new company acquiring clearly defined assets and liabilities.

Obviously, the lesser liability exposure a buyer has, the higher the deal price as any buyer will fold liability into a transaction price.

Sellers beware: a seasoned business buyer or investor – certainly a smart buyer’s transaction attorney – will most definitely identify liability risks during the due-diligence phase.

Consciously not disclosing such liabilities, in an ultimately fraudulent transfer, will in all likelihood subsequently surface and result in litigation expenses at a multiple of the original liability expenses. If such a discovery was not already made in the due-diligence phase, there will be a complete loss of the seller’s credibility resulting in an aborted transaction by the buyer.

In short, post-closing, many facets in the life of a seller will already change, and litigation due to improper liability limitation should be one aspect to be avoided.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or

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Client Testimonials

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

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Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs
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If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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