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Transition companies help businesses transfer ownership, manage mergers and acquisitions, and handle division of product lines. They can also provide middle management services, facilitate real estate transport, and recruit interim executives. Their services can help companies avoid complications and legal mistakes during transitions.
A transition company facilitates the transfer of ownership of a business operation from one entity to another. Transition companies sometimes provide middle management services during the transition. Companies operating in this sector can also help companies looking to deleverage – reconciling debts to make them more attractive to potential buyers. Transition companies can also assist in brokering mergers and acquisitions.
A common service provided by a transition company is to facilitate the transport of real estate, as in the sale of a business. Transferred real property can include tangible items such as production equipment or intellectual property such as patents and copyrights. Transition companies mediate these transitions, much like a realtor does the sale of real estate.
Companies hire transition companies to manage corporate sales, mergers and acquisitions. Hiring their services can help companies avoid major stumbling blocks during transfers. These complications can include loss of market share or reputation.
Sometimes, the services of transition companies can be used to manage the division of a subdivision of an existing product line. For example, this could happen if a large software company that produces several lines of software decides to take one of those lines and separate it from other operations for a future sale. Companies that broker the sale or purchase of a business can also manage relationship issues that may arise between staff and management during the transition process. If a Fortune 500 company misses a major leadership change, such as installing a new CEO, it could suffer a significant loss of reputation.
A company trying to handle a transition internally may not have previous experience understanding the potential complications that can occur. Legal mistakes and personality conflicts of those involved can negatively impact the transition process. Another pitfall that transition companies can help companies avoid is incomplete disclosure. If the buyer does not receive information about a recent drop in orders or equipment that is reaching the end of its expected useful life, lawsuits may result.
In a company CEO change, transition services may include recruiting an interim CEO, chief financial officer (CFO) or chief operating officer (COO). These three positions are often considered the core of a company’s management team. An individual can occupy more than one leadership position.
Those who work as interim executives at a struggling company, or an operation within a company, often focus on short-term strategies. Once profitable operations are restored, responsibility for long-term strategies will be devolved to company leadership. Temporary directors typically employ strategies that seek to better position the company over the long term to become profitable and manage risk.
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