In the two deals we recently completed, one seller used an experienced deal attorney while the other attempted, for a while, to use their general business attorney. Here is why an experienced deal attorney is usually the best choice.
Note: The “Tale of Two Deals” series explores different aspects of two deals that we closed recently in the same week.
First, let me reiterate that you should use an attorney for the sale or purchase of your business, large or small. For small business transactions business brokers will provide many of the forms and agreements you need, and that is fine (for small businesses), but have an attorney review everything before you sign, just to make sure you are not falling into a large legal hole. It is worth it in the long run.
For a larger company it isn’t an option. As you can read in my piece on due diligence, some of the legal contracts are custom-written by a buyer’s attorney to address concerns and issues with your particular business, and you need an attorney to make sure they are fair and reasonable. I can help as an experienced deal maker, but I’m not an attorney and I can’t (and don’t wish to) write up legal contracts.
The Deal Attorney
An attorney with deal experience (ask if they personally have done any transactions in the past year) is easier to work with since there are many deal terms that are common in the industry, but will cause a generalist attorney to hit the books and do research to find out what a particular term means, and more importantly, how reasonable, fair and common that term is.
One of our recent deals used an experienced deal attorney from the start. The attorney interviewed our client and the deal terms, and was able to quickly focus on the areas of the transaction that represented some risk to our client. When the purchase agreement was delivered by the buyer, he was able to say, “oh – that is standard in practically every deal and its unlikely we will be able to change it, so lets not worry about that. This, on the other hand, I don’t see in many deals and it doesn’t seem reasonable…”.
The Other Attorney
On our other deal, the attorney, however good he was in his area of expertise, didn’t have the experience in business sales transactions to know how to prioritize and thus focus his time on the most important issues. He started to go down some paths that turned out not to be relevant to the most pressing legal issues.
Fortunately, it became apparent that an attorney with more deal experience was necessary and we were able to recommend someone to come in and assist with the transaction. It was an important move, because the transaction became more complex than we ever imagined because of tax issues. The first attorney would be first to admit that he wasn’t going to be able to structure the deal that we ended up with, which saved the seller in tax dollars.
The Transaction Team
It is important to note that your attorney should be thought of as a team member, not the only one driving the process. Other members of your team are your deal advisor (I stay very involved right down to the close) and your tax advisor. Sometimes an aggressive attorney can hijack the process, and that can be costly in both time and especially money. Remember the attorney works for you, and try to keep an overall view of the transaction and your goals.