When key employees walk post-close, what’s lost isn’t just talent. Client relationships weaken.Knowledge disappears.Revenue predictability erodes.Risk increases. The goodwill that justified the price no longer exists — because the economic engine left with the people. Goodwill follows people.
Goodwill & Value Erosion
Retention Is a Valuation Variable
If earnings depend on specific individuals, retention is not an HR issue. It’s a valuation input. Retention risk should influence:• Purchase price• Deal structure• Earnouts• Closing conditions When it doesn’t, goodwill is overstated — even if the math is clean. Retention risk belongs in the model.
Human Capital Risk Is Often Mispriced
In lower-middle-market deals, human capital risk is frequently underweighted. Earnings are capitalized.Multiples are applied.But the assumption that key people will remain is rarely stress-tested. When value is people-dependent, goodwill is people-dependent. Ignoring that doesn’t make the valuation wrong — it makes the assumptions fragile. Assumptions determine value.
Goodwill Is Not Purchased in Isolation
Many acquirers think goodwill is something permanent. It isn’t. Goodwill exists only so long as the conditions that created it remain intact. Remove the people who generate the earnings, and goodwill becomes a number without an engine. Buying equity does not buy people.People choose to stay. Ownership transfers. Commitment does not.
What Goodwill Really Represents
In valuation, goodwill isn’t an abstract concept. It represents the expectation that future earnings will continue — consistently and predictably — beyond the value of identifiable assets. That expectation quietly assumes continuity:• Of operations• Of relationships• Of institutional knowledge• Of people When continuity breaks, goodwill doesn’t decline gradually.It often disappears. Goodwill assumes continuity.
The Deal Didn’t Lose Value. It Was Never Secured.
Buying equity does not buy people.People choose to stay. In many acquisitions, goodwill represents the expectation that earnings will continue — supported by the same people, relationships, and knowledge that created them in the first place. When buyers assume key employees will remain without asking, without listening, and without securing alignment, they don’t just risk … Continue reading The Deal Didn’t Lose Value. It Was Never Secured.
The Warning Signs Were There…
Too often, post-close challenges are framed as unexpected events when, in reality, the warning signs were visible well before closing — in leadership dynamics, retention assumptions, and integration readiness. Those “soft” issues translate directly into goodwill impairment, cash flow disruption, and increased credit risk, even when the valuation methodology itself is sound. The goal is … Continue reading The Warning Signs Were There…
Bought Lessons and the Price of Value
In transactions, leadership, and lending, the most expensive lessons are often the ones people assume they won’t have to pay for. They assume goodwill will transfer.They assume people will stay.They assume leadership intent will overcome execution gaps. When those assumptions fail, the lesson is bought — sometimes at a very high price. What matters isn’t … Continue reading Bought Lessons and the Price of Value
Why Experience Changes Judgment
There’s a reason experience shows up as judgment rather than confidence. The best lessons are bought lessons — and they usually cost more than we expect at the time. They cost money, time, trust, or opportunity. Sometimes they cost all four. But what you get in return is perspective. People who haven’t paid for a … Continue reading Why Experience Changes Judgment
Bought Lessons Don’t Make You Bitter
“The best lesson is a bought lesson.” Some lessons don’t really land until they cost you something. Advice is helpful. Observation matters. But experience paid for with real consequences has a way of settling in permanently. In business and leadership, this shows up everywhere. The lesson you learn before a mistake is intellectual.The lesson you … Continue reading Bought Lessons Don’t Make You Bitter
Highland Global Business Valuations 