What if a key employee quits before closing?

Small business value is often tied to specific people far more than buyers like to admit — a manager who holds the customer relationships, a technician nobody has fully replaced. Losing that person between signing and closing is one of the more common ways a deal falls apart.

Why buyers build in protection before it happens

A purchase agreement can name specific individuals as key employees and make continued employment of some or all of them, through closing, a condition the buyer can insist on. Where the deal was priced partly on that person’s presence, their departure genuinely changes what the buyer is paying for — which is exactly what a material adverse change clause is meant to address.

What the buyer can typically do about it

• Invoke a closing condition tied to key employee retention, if one was negotiated into the agreement
• Push to renegotiate price, reflecting the reduced value of the business without that person
• Request additional transition support from the seller, such as extended consulting time
• Walk away, if the agreement gives that right and the departure is serious enough

Why sellers should get ahead of this, not react to it

A seller who suspects a key employee is unhappy, or simply knows the business depends heavily on one person, should raise a retention arrangement well before the deal is signed, not after the person hands in notice. A retention agreement with a real financial incentive to stay through the transition is far cheaper than a collapsed sale or a reduced price.

Share sale versus asset sale here

The commercial risk is largely the same either way, since the business’s dependence on the person does not change with the deal structure. What differs is who is negotiating that person’s continued employment — in an asset sale the buyer is offering a fresh contract and can build in its own incentives directly; in a share sale the existing employment relationship simply continues under new ownership, so retention has to be addressed through a separate arrangement.