(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.

By: Stuart M. Brown, Esq.

Selling your business will be complicated, emotional and, almost definitely, stressful.  Once you decide to sell your business, the first step is usually hiring an intermediary – either a business broker or an investment banker.  The intermediary will ask you to enter into an engagement agreement.  This person is working for you and with you, so sellers frequently choose not to have a mergers and acquisitions attorney review the engagement agreement before signing it.  Besides, you may think, what could go wrong?   Plenty!  To avoid uncertainty while ensuring a clear understanding of the specific terms you are committing to, at what cost, and for how long, hire an M&A attorney to review the engagement agreement.

Here are some deal points to keep in mind when entering into engagement agreements with intermediaries:

The agreement should provide a reasonable period of time for the intermediary to prepare a confidential information memorandum and market your business.  This is known as the exclusivity period.  The exclusivity period should be an amount of time that you and the intermediary believe is reasonably sufficient to market your business and close a deal; however, there should be a defined end point.  A defined termination date will guide and incentivize the intermediary and create an orderly exit from the relationship with the intermediary.Read More

The Continuing Evolution Of Cybersecurity Risk Management

By: Kenneth L. Moskowitz, Esq. and James D. DeBartolo, Esq.

In April 2015, a client of the Chicago based law firm Johnson & Bell, LTD (“J&B”) filed a class action lawsuit in federal court in Illinois against its attorneys charging that they failed to protect their clients’ confidential information (“Action”).[1]  The Action and the claims asserted therein are compelling reminders of the evolving risks facing those entrusted to protect their clients’ confidential data.  Plaintiffs allege in the Action that, notwithstanding the fact that J&B had not suffered a cybersecurity breach to date that had caused them any harm or damage, the firm nonetheless should be adjudged liable for failing to maintain “industry standard” cybersecurity  protections.

Read More

A Survey Of Relevant Statutory Law And Some Practical Considerations

By: Kenneth L. Moskowitz, Esq. and James D. DeBartolo, Esq.

The business community and employers are under the constant threat of the conversion or corruption of their invaluable computer assets by employees, competitors and “hackers.” To address these ever-present and evolving threats, both the United States and the State of New Jersey have enacted statutes that both criminalize such conduct and provide for private causes of action that include remedies designed not only to make the victim whole, but to punish and deter such unlawful conduct. This article presents a brief survey of the relevant statutes,[1] and offers some practical risk mitigation strategies to be considered by the business owner before his or her business becomes just another victim.Read More