In every business for sale transaction, regardless of the size of the business, there is a long list of items that require negotiation between the parties.
These include deal pricing and terms, lease assignments, deal structure, valuation, financial components, non-compete clauses, post-sale training, due diligence review periods and on and on the list goes. Unlike real estate transactions where there is a laundry list of items to be covered that generally repeats itself in every transaction, with a business for sale, every deal is different.
Since most prospective business buyers and owners looking to sell are first-timers, there are typically ill prepared to deal with the wealth of issues that need to be discussed and resolved.
Too often, as a result of this inexperience, the parties get derailed and are unable to come to a satisfactory resolution on the many issues they face and therefore the transaction never reaches a successful conclusion. This is especially true when there are no intermediaries involved to guide the parties and to keep the deal on track.
Other third-parties that are customary in these transactions such as accountants and attorneys can often be more of a detriment than an asset to the parties. In future posts I will discuss accountants in more detail, but for now, I want to expand upon the involvement of lawyers.
Buyers and sellers often have an ill-conceived notion of the role of an attorney and many believe that they can simply turn the deal over to their lawyer to negotiate the details.
This strategy is usually a recipe for failure. Attorneys have their place in a transaction and it is a very important contribution however, it must be limited to first, ensuring the parties who they represent are adequately protected, secondly to compiling all of the necessary documentation, and third, to translate to legalese what has been agreed to between the buyer and seller.
The third point mentioned above is without question the most important one. I have been involved in hundreds of transactions over the past twenty years. If a buyer and seller want to get a deal done, then it is up to them to make it happen. Rarely does any situation surface that is a true deal-breaker.
The fact is that a resolution can be found for every situation if, and only if, the buyer and seller truly want to consummate a deal.
When a buyer wants to buy, and a seller wants to sell, and the parties like and trust each other, you cannot stop them from making a deal.
They always find a work around to the obstacles that surface.
Prudent attorneys allow the deal to evolve and enable, not derail, the parties to work their way through key issues which may initially loom large, but can be resolved simply with meaningful dialogue between the buyer and seller.
Buyers and sellers have to work out their differences and make it their mutual goal to reach common ground on the key issues.
At the same time, the parties have to understand that they cannot each win every point. There has to be some give and take. I would never discount the importance of having third-party advisors involved in the transaction, but nothing replaces the parties being able to build trust between them so that they can work through each detail and then it is the time for the attorneys to draft the necessary documents to put the intentions of the parties into the correct legal format.
Richard Parker
The Business Buyer Resource Center™