Every business that has been owned by one person for a long time runs on promises that never made it to paper. The senior estimator who was told the next bonus would be bigger. The customer told the rate would not go up while the seller owned it. The manager who was promised a share of the business someday. The data room did not mention them, because the seller did not think of them as commitments. They think of them as how things work.
You inherit them anyway. The question is whether you find them in week one or when somebody quits. You flush them out during pre-close work; the pre-close checklist and seller transition plan shows how.
Where the unwritten promises hide
Employees first. Pay raises, bonus expectations, promised promotions, vacation arrangements, flexible schedules, and talk of equity. Then customers. Prices, delivery terms, service response, warranties beyond the contract, informal credit. Then vendors, where the deals are handshake rates, favors, and exclusivities.
Landlords, lenders, and family members come last but matter. A relative on payroll, a parked vehicle, a loan that was never papered. These are the things that do not show up in a normal diligence list.
How to find them before you close
Ask the seller directly, in a conversation, not a form. Say the goal is to avoid breaking things after they leave. Ask who they have made promises to, and about what. Ask the same question to the second layer of management, separately. The answers will differ, and the differences are the information.
Ask what the top ten customers and the top ten employees expect to happen next year. You are not asking for a legal list. You are asking for the expectations that will be tested on the first of the month.
Which ones you have to honor
Some are legal obligations, even unwritten. Some are simple fairness that your team will measure you by. Some are plain mistakes you can quietly correct. Sort them. Ask counsel which could be enforceable. Then decide on purpose: honor, renegotiate, or retire. The mistake is letting them lapse by accident.
When you do retire a promise, tell the person yourself, early, with a reason and something in return. A promise that is broken quietly turns into a story about you. A promise that is renegotiated openly turns into a story about how you treat people.
Who delivers the news
For a promise to an employee or a customer, the seller is often the right person to introduce the change, and you are the right person to explain it. Use the transition period. For the detail on that, go to how long the seller should stay after closing.
If a key person was promised money or equity that closing did not deliver, that is a retention risk that needs attention in the first week. See key people who cashed out at closing. A seller's promise can also be the reason someone expects to be paid out at closing; check that before day 1. I assume every long owned business carries promises nobody wrote down, and I go looking for them before I look at the numbers.
Sequenced list: surface and settle the unwritten promises
Run this before closing if you can, and in the first thirty days if you cannot.
- Interview the seller on promises made to staff, customers, vendors, family, and lenders. Owner: the deal lead.
- Interview the second layer of management separately on the same questions. Owner: the general manager.
- Build one list: who was promised what, by whom, and when. Owner: the integration lead.
- Sort each item: legal obligation, strong expectation, or mistake. Owner: counsel, with HR.
- Decide honor, renegotiate, or retire, and the cost of each. Owner: the president.
- Assign who tells each person, and when, with the seller present where it helps. Owner: the general manager.
- Document the outcome and add any new commitments to the tracker. Owner: the integration lead.
A word on timing
The cheapest time to find a promise is before the price is set, because you can still trade it. After closing, every promise is a cost you absorbed. Ask early, ask more than once, and ask in different words. A seller who says there is nothing will often mention a promise ten minutes later while talking about a specific person.
Write the list as you go and keep it in the same place as your other integration records. A promise that lives only in your head is one you will forget in the second month, when the team has stopped asking and started assuming.
What this protects
A short list of promises, honored on purpose, is a cheap way to show the team that the new owner can be trusted. Broken ones are expensive. A technician who is told one thing by the seller and another by you will not stay for long. For the wider approach to keeping the people, turn to employee retention after acquisition.
The same logic applies to the seller's own side of the relationship. Whatever you promised the seller should also be written down and tracked, including how long they stay.
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Questions
Do I have to honor promises the seller made to employees?
Not automatically. Some verbal promises may be enforceable and some are simply expectations your team will judge you by. Find them, sort them with counsel, and decide on purpose whether to honor, renegotiate, or retire each one. Tell the affected person yourself, early, with a reason.
How do I find promises nobody wrote down?
Ask the seller and the second layer of management separately, and compare the answers. Ask what the top customers and top employees expect to happen next year.
Are verbal promises to employees legally binding?
Some can be, depending on the state and the circumstances. Ask counsel. This page is not legal advice.
What if the seller says there are none?
Ask again, differently. Ask what the top employees expect next year, and what customers have been told about pricing. Most sellers do not think of habits as promises.