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Attorneys are Deal Killers
By Quiet Light
Selling a web-based business can be a complex process. There are many moving parts in play, and one part moving against a deal being made can break that whole system down. When that happens, you may not be able to tell where you went wrong. Surprisingly, if you have an attorney on your team, the fault could be theirs.
Working in acquisitions generally means trusting people on your team with skills you do not have. Your attorney is a perfect example – they have training and knowledge to protect your interests and avoid potential liabilities. They’re a tremendous asset to structuring your deal but what if they’re part of the problem? How can you tell if your attorney has become a “deal killer”?
I am not advocating that you forgo the use of an attorney. Good attorneys will make a deal move faster and protect everyone involved. Buyers and sellers however should remember that their attorney is not the director of the deal, but one cog in a complex process.
Since brokering online sales and acquisitions is my business, I thought it was time share a few problematic behaviors you should look out for.
They Start Over With A New Purchase Agreement
If your attorney wants to write a purchase agreement from the ground up, there is a good chance they may just looking for billable hours. This is unnecessary; starting with a boilerplate and modifying it will be reasonable for nearly all transactions. Reputable law firms nearly always have a library of commonly used agreements that have been well researched and proven that they can use as boilerplates in order to save their clients billable hours. Not only does starting with a boilerplate assure legal language is consistent in context, but it can also save you and your team unnecessary time and confusion.
They Make One-Sided Agreements
Whether you’re proposing a deal or reviewing one, it’s important to consider participants interests on either side of the fence. You pay your attorney to look out for liabilities. However, some attorneys just don’t understand that one of your interests is to get a deal done, and so some edits that come back from attorneys are so one sided and biased toward their client’s gain that the agreement will never result in a deal. Always review your attorney’s edits and ask whether it sufficiently addresses the interests of both the buyer and the seller to avoid stagnating your deal.
They Ask For Unreasonable Assurances
Assurances can of course be important. Expecting the other party to stand by their representations is quite expected and normal. Asking them to guarantee performance is another beast. Some attorneys work so hard to protect their clients that they blind themselves, and handcuff them to unreasonable expectations – preventing them from ever getting a deal done.
They Are Totally Unfamiliar With The Space
Has your attorney ever worked in the online space? Have they ever facilitated the documents for the sale of a business? Their lack of knowledge can kill your deal. Not understanding what to look for in an online acquisition can result in a lot of needless paperwork and processes leading to deal bloat, delays, and oftentimes a dead deal. If you can’t find an attorney with relevant experience, you can always talk to your attorney about industry expectations.
They Work Too Slow
Timelines are crucial for keeping the goodwill between either party in your deal. Some attorneys take far too long to return and review documents. Hold ups like this can cause rifts between either side, and they can ultimately delay the entire process of closing the deal. Maintaining a timeline for your entire team for each step of the process can help you avoid messy situations down the line.
Bottom line: Remember that your attorney works for you. Smart buyers and sellers communicate frequently with their teams, and by understanding and avoiding these possible “deal breakers” there’s a chance you can save yourself and everyone involved some time, money, and aggravation.
Your attorney is an important advisor, but you are the director of the deal. You do not need to accept 100% of their recommendations, and you should always ask for their reasoning. If you think a recommendation will ruin a deal, ask your attorney if there is an alternative.
Comments are closed.
Good wisdom here, especially the part when the attorney doesn’t seem to grasp that “one of your interests is to get a deal done”
Agreed. Every deal has risk. An attorney has the obligation to point out the risk in your deal. You, as a buyer, have the obligation to assess whether the risk he/she pointed out is worth taking. The point being this: you make the decisions for yourself.
Amen, Mark! Anybody who’s been in this business for long enough has probably heard all possible variations of “my attorney said so and that’s how it’s going to be”, without the person actually signing the agreement having put any thought into whether the advice is even sensible at all.
It’s actually rather funny how blindly many smart, educated people tend to trust their solicitors, regardless of how crazy (or sometimes blatantly wrong) the advice that they’re getting is. “He knows best” often prevails.
I’m also glad you mentioned warranting future performance. Luckily I haven’t had any requests for this lately but do remember a few from some time ago, and remember myself thinking how would anybody even so much as think of requesting something like this, especially with the performance of any business being first and foremost dependent on the current owner’s/manager’s actions, rather than on its past. Oh well.
Happy 2015 to you and to QLB!
More than once I have seen deals die because of unreasonable attorneys. The worst is an attorney related to the seller or buyer. My advice to all buyers and sellers is 1.) never hire a relative and 2.) don’t be afraid to remind the attorney who they work for – and that your objective is to get the deal done so it is successful (and reasonable) for BOTH parties. It cannot be one-sided, no one wins in that situation.
All true. I had a business purchase blow out because of my lawyers delay. He was a great lawyer with a lot of relevant experience, The problem was simply that I was not his priority – he was too busy with his corporate clients to find time, when I really needed it, for my deal. Great lawyer, but the wrong lawyer.