Capittal's view: how long do I have to stay on after selling my company?

Quick answer

Capittal's view is that a seller's stay-on period normally runs between six months and three years, and that two things set the length: who is buying and how much of the price is deferred. If you are paid in full at closing and the buyer is a trade player in your sector, you can negotiate a short handover; if there is an earn-out, the stay-on stops being negotiable, because nobody pays deferred consideration to a seller who has already left.

Why does the buyer want me to stay if they have already paid me?

The buyer is not keeping you on out of distrust. They are keeping you because part of the value they have just bought sits in your head and your contacts book, and appears on no balance sheet.

In a Spanish mid-market company the owner usually holds the relationship with the main customers, the pricing judgement, the dealings with the banks and the authority over long-serving staff. None of that transfers when a deed is signed. It transfers through introductions, shadowing and explanation over months.

• Customers. The contract belongs to the company, the trust belongs to you. The buyer wants to be introduced in person, not by email.
• Banks and suppliers. Payment terms and risk limits rest on years of personal dealing.
• The team. Your immediate departure creates internal uncertainty exactly when the buyer needs nobody to resign.
• Undocumented know-how. How a job is priced, which margin is acceptable, which customer pays late. That lives in your judgement, not in a manual.

The more the business depends on you, the longer the stay-on you will be asked for. The way to shorten it is not sharper negotiation, it is reducing that dependence before going to market.

How long will I be asked to stay, depending on who buys?

The buyer type sets the term, because each one arrives with a different management capacity.

• Trade or strategic buyer. Needs the least time: they already have a management team, systems and a sales structure. Six to twelve months focused on customer handover and integration is typical.
• Private equity. Buys a growth plan and needs somebody to execute it. Asks for longer terms, two to three years, and usually links them to you rolling part of your proceeds into the equity of the new holding company.
• Search fund or individual buyer. Will run the company personally from day one. Asks for fewer months but far more intensity: a dense handover at the start and a tapering presence afterwards.
• Family group or family office. Sits in between and often values you staying on the board even after you hand over day-to-day management.

These are market patterns, not rules. What is constant: the term is negotiated at the same time as the price, not afterwards. Leave it to the final contract and you will negotiate it with no leverage at all.

What contract do I sign to stay, and in what capacity?

On completion day you stop being the owner, so your link to the company has to be rebuilt in writing. Four structures are common and they are not interchangeable.

• Senior executive contract. A special employment relationship governed in Spain by Royal Decree 1382/1985. It gives a clear framework for notice, withdrawal by the employer and agreed severance, and it is the natural route if you stay as managing director.
• Commercial services agreement. You invoice for your services, usually with a capped time commitment. It requires the relationship to be genuinely independent: if you keep an employee's hours, tools and reporting line, the structure will not hold up under inspection.
• Board seat. Gives you a voice on the board and no executive powers. Useful for accompanying without commanding.
• External adviser. The final phase: a handful of days a month for specific questions and occasional introductions.

Choosing the structure is not a tax formality. It determines who can end the relationship, on what notice and at what cost. Insist that this contract is negotiated at the same time as the sale agreement, not bolted on as a last-minute annex.

Does that salary come out of the sale price?

It should not. These are two payments for two different things: the price buys your shares, the salary pays for executive work you will deliver after closing. Agree to stay two years with no specific pay and you are giving away two years of running a company.

Negotiate that package as hard as you would negotiate a job: base pay, bonus if there is one, car and expenses if you had them, and what happens if the buyer lets you go early.

One detail almost nobody checks: your new salary is a cost of a company that is no longer yours, and it reduces EBITDA. If the earn-out is calculated on EBITDA, that salary eats into your own deferred consideration. Write into the formula whether your pay is excluded from the calculation or whether the target is adjusted by that amount.

What happens to my stay-on if the price includes an earn-out?

With an earn-out, the stay-on stops being a concession to the buyer and becomes your own protection. If you leave, you lose control of the variables that decide what you get paid and the buyer keeps all of them.

So when there is deferred consideration, the question changes from how long do I stay to what powers do I keep. These four clauses are the ones worth money.

• Perimeter. Which business unit is measured and under which accounting policies, frozen as at the closing date.
• Levers. Which decisions you can take without approval: pricing, hiring, sales investment up to a stated euro limit.
• Information. Monthly access to that unit's accounts for the whole earn-out period.
• Acceleration. If the buyer removes you without cause, the earn-out is paid in full or settled under a formula agreed in advance.

Without the acceleration clause, your deferred price depends on not being dismissed. That is not a price, it is a hope.

Will I still be in charge of my company during that period?

No. From completion day you move from deciding to proposing and reporting. It is the change sellers handle worst and the one almost nobody raises during the negotiation.

You will have a budget somebody else approves, a committee to answer to and, frequently, the buyer's finance director reviewing decisions you used to make in five minutes. It is not a sign of distrust: it is how any group operates.

The way to stop this ending in a slammed door is to write it down first. Put into the contract which decisions remain yours and which now need approval, with specific euro thresholds, and who you report to by name and title. Ambiguous authority is the single most common reason a stay-on breaks down after six months.

What do I sign on non-compete, and can I leave early?

A non-compete is always signed, and it is signed in the sale agreement, not the employment one. When you sell shares, the undertaking not to compete is a contractual obligation of the seller, not the post-employment non-compete under article 21 of the Spanish Workers' Statute, which does require separate financial compensation for the employee. It is worth knowing which of the two you are signing.

• Non-compete. Limit the activity, the territory and the term. An undertaking drafted around whole sectors or with no geographic limit leaves you unable to work again in the only thing you know how to do.
• Non-solicitation. Covers employees and customers. Name the individuals covered, or at least the seniority level, rather than accepting the entire current and future workforce.
• Carve-outs. Exclude what you already have: minority financial investments, family stakes in other businesses, teaching work.

On leaving early: ask for it in the first round of offers, not once you are fed up. Agree an exit window that opens after a set number of months, on written notice, that triggers no penalty and does not forfeit an earn-out already earned. If the buyer flatly refuses any window at all, that tells you the business depends on you more than they admit and more than you thought.

What is the next step if I am going to be asked to stay?

Take an inventory of your own indispensability before you speak to anyone: customers whose relationship is personal, decisions that only go through you, undocumented processes, contacts nobody else holds. Every line on that list is months of stay-on, and cutting it down before going to market is the only thing that genuinely shortens the term. Then bring five points to the table in writing from the very first offer: a firm exit date, defined duties, a commitment stated in days per month, pay separated from the price, and an early exit window that does not penalise the earn-out.

At Capittal Transacciones we work on the seller's stay-on and how it fits with the earn-out as part of the confidential valuation we prepare for owners considering a sale. We are a mid-market M&A boutique operating in the approximate range of 3 to 250 million euros, with eight offices in Spain (Barcelona as headquarters, Madrid, Girona, Lleida, Tarragona, Palma, Zaragoza and Valencia) and we are part of the NRRO group. The partner handles each mandate directly, including the conversation about how many months you will have to stay and on what terms.

Keep reading

• Guide: every decision you face when selling your company
• From headline price to bank account: what you actually take home
• How to sell a company that depends on the owner

Negotiate your stay and your exit: talk to Capittal