Author Archives BMK Law

(published on LinkedIn July 16, 2019)

Fact, you have a great group of advisors who are there for you. One morning, you are pleasantly surprised when you are contacted by a credible third party who is interested in buying your company for a substantial sum and she presents you with a letter of intent (LOI). You read it through carefully and you contact the buyer to let her know that you are all set to go, but you just want to run it by your lawyer first. You tell her, “No big deal, I just want his quick review… I’ll have it to you by noon.” You email this message to her at 6:45 p.m., just before you leave for the night. The last thing you do before leaving your office is send the LOI to your attorney, asking him to review it so that you can sign it and send it to the buyer by noon on Tuesday (of course, it is now 7:00 p.m. on Monday night).

Your lawyer wants to please you, trust me, he does. Clearly, he has been waiting all day for your email. In fact, when he woke up on Monday morning, he had a feeling that you would get an unsolicited offer to sell your business and that he would have to review the LOI quickly. If it is not obvious, the last two sentences were written sarcastically.

Successful transactions require all parties to set reasonable expectations. If your attorney had nothing to do and was just waiting around for your email, you probably should switch attorneys. Most of us are busy — very busy — and that’s the way you want it: this means that we are in demand, working with clients on matters similar to yours. What we learn on a daily basis can then be applied to your matters for your benefit.

The lesson here — be realistic. You cannot reasonably anticipate that your attorney will be able to drop everything for you, review, analyze and potentially revise a significant document like an LOI “overnight.” If unreasonable expectations are set, everyone will be subject to unnecessary stress, impeding the ability to focus. In fact, the process will take longer under those circumstances.

Speak with your attorney, explain your needs and your wants (two different things) and discuss when you can reasonably expect the work product. It will result in a less stressful process, a better work product and get you to the finish line more quickly.

(published on LinkedIn July 2, 2019)

If you are working toward selling your business and you receive a proposal to sell the stock in your business, rather than the assets, I suppose you would be happy. Chances are you will be taxed at capital gains rates rather than ordinary income tax rates… all is well.

Assume, for this post, that the buyer is willing to pay your asking price. However, she wants to pay it over a long period of time and you are asked to “carry the paper” (the buyer will provide you with a promissory note to memorialize the debt).

Couple of thoughts:

• Be cautious. If you get a pledge of your stock as security, you may think that is sufficient. Think again. If the buyer drives the business into the ground and stops paying you under the promissory note, what good is the stock?
• Be creative. Oftentimes, there are alternatives… a lien on the underlying assets, personal guarantees, letters of credit, etc. Also, consider accepting a lower purchase price in order to accelerate the payments over a shorter period.

Bottom line, you are not wed to any deal structure. Consider several alternatives and analyze the consequences with your attorney. Remember, there is no correct answer; however, there are bad results.

(published on LinkedIn June 18, 2019)

Successful transactions are consummated every day, some due to the skills and experience of the deal team and others purely by luck. Assuming you prefer the former, I suggest you consider the following when working with your attorney toward a successful outcome on a transaction:

1. Engage your attorney early on in the process. Speak with your attorney before you enter into a preliminary agreement such as a letter of intent (in connection with a purchase or sale) or a commitment letter (in connection with a financing). An experienced business attorney should be able to help you frame the structure of the transaction.
2. Allow your attorney to review the preliminary documents and provide you with feedback before you commit to the preliminary terms. The tone of the negotiations is set at this early stage. Knowledge is power and you want to maintain a position of strength throughout the negotiation.
3. Use your attorney as your proxy. Attorneys should be the “bad” or “tough” guy or gal during the negotiation. Chances are, you will have to maintain a good working relationship with the counterparty on a post-closing basis.
4. Communicate with your attorney and be honest. Ask questions frequently and satisfy yourself that you understand the answers.
5. Set realistic deadlines. Setting unreasonable deadlines will only create additional stress on all parties which leads to sub-par work product. When mapping out the timing of transaction process, ask yourself where you have leeway.
6. Do not lawyer for your lawyer. You engaged your attorney to represent your interests. While tempting, resist self-help methods to save a few dollars. Allow your professionals to do their job.
7. Discuss fees and bills on a timely basis. If you have questions regarding current invoices, bring those concerns up to your attorney as soon as possible. This should ensure that the time entries in question remain fresh in people’s minds.
8. Last, bear in mind that your attorney is on your side. If you believe that your attorney is taking the wrong approach do not circumvent him or her by going directly to the counterparty. Rather, discuss your concerns with your attorney frankly and promptly.

Communication is critical when working with your attorney. Speaking often and directly should save you time and money and make for a much less stressful transaction.