SMBQuest

The deal closed. The wire cleared. The buyer had the keys. And then the seller started trying to destroy the business. That sounds dramatic, but I’ve seen versions of this happen more than once. One client bought a business and, three months after closing, got a call from an angry customer. The customer said a job had been done poorly and wanted it fixed. The buyer searched the system. Nothing. No job file. No record. No invoice. So they asked the customer to send over the purchase order or invoice. The customer did. And that’s when the buyer realized the problem. This was not a job the buyer had done. It was a job the seller had done after closing. As it turned out, the seller had not been honoring the non-compete. He was still running around town doing jobs. Competing. Soliciting customers. Talking to employees. Actively undermining the buyer. The buyer called a litigator. The answer was painful but honest: Yes, you may have a claim. Yes, the seller may be violating the purchase agreement. But enforcing this is going to be expensive. Probably north of $100,000. It will require facts, evidence, time, and litigation. So you need to decide: Is this an existential threat to the business? Or is this something you handle by putting your head down, outworking the seller, and moving forward? That is a brutal decision for a buyer to make three months after closing. But it happens. Another buyer bought a business that relied heavily on an Amazon seller account. The account had 4,500 five-star reviews. According to Amazon consultants, that account represented millions of dollars of enterprise value. The problem? The account was still in the seller’s name. The seller claimed he tried to transfer it and Amazon said it was not possible. The buyer’s consultants were hearing something different. The seller was going to turn it off. So the buyer went to court and obtained an injunction requiring the seller to keep the account open and continue cooperating. The key provision? Further assurances. A boring-sounding covenant in the purchase agreement that suddenly became one of the most important provisions in the entire deal. Another buyer could not get the point-of-sale system transferred after closing. For the first six weeks, the buyer could not properly accept payments. Meanwhile, the seller was telling customers and employees that the buyer would be out of business in six months and that he would buy the company back out of bankruptcy. Again, the question became: What does the purchase agreement say the seller has to do? What does it prohibit the seller from doing? What cooperation is required after closing? What happens when the seller refuses? This is why covenants matter. Non-competes. Non-solicits. Non-disparagement. Confidentiality. Transition assistance. Further assurances. Post-closing cooperation. These are not just filler provisions that lawyers throw into the back half of a purchase agreement. They are the rules of the road after closing. And when something goes wrong, they may be the only source of leverage the buyer has. A lot of buyers think the deal is over when the documents are signed and the money moves. It is not. In many deals, closing is just the moment when the buyer finds out whether the seller is actually going to cooperate. Sometimes they do. Sometimes they don’t. And when they don’t, the covenant section of the purchase agreement can become very real, very fast. That’s what the latest episode of Main Street Deals covers. Because covenants are not boilerplate. They are the buyer’s post-closing protection plan. Enjoy!

This Friday, the ETA Capital Forum brings together operators, investors, and advisors shaping the next wave of small-business acquisitions. I’ll be there with insights on deal structures and post-close growth. Will I see you in New York? Register here: luma.com/sfccf

Huge Announcement! 🚨 I’ve partnered with @pinpulleddrmf and @uncommon_elite to bring elite leadership to small businesses by connecting them with former special forces operators. Over the last three years, we’ve supported the acquisition and operations of over a billion dollars’ worth of American small businesses. And almost every entrepreneur I’ve spoken to shares the same challenge: Finding good help and good operators to fill the day-to-day leadership. Through this work, one thing has become crystal clear to me. Nobody is better equipped to step into tough entrepreneurial roles—leading with discipline, execution, vision, and strength—than veterans, especially those from special operations. Christian is building a game-changing pipeline to place the best of the best from Delta Force, Navy SEALs, the 160th Night Stalkers, and other elite units into small business leadership roles. This mission isn’t just important—it’s essential for the businesses we serve. These operators have already proven they can perform under pressure, adapt quickly, and lead teams to success. It’s also awesome to get to support and serve our incredible veterans as they move into, and throughout, the private sector. I’ve had the privilege of getting to know Christian personally over the last year and a half, both personally and professionally. He’s one of the most honest, strategic, and high-integrity people I’ve met. Partnering with him and Uncommon Elite is an honor. If you want to learn more about how adding a former special forces operator to your business can take it to the next level, reach out to @pinpulleddrmf or me.