Have you ever sat across the table from your counter party to a deal and thought: “Do they want this or are they looking for ways to kill it???” Well, we certainly have. Being a lawyers is, at times, like being an undertaker at a wedding. But, just by advocating for your client’s interest, or protecting their *ahem* behinds, you DON’T have to be a Deal-Killer. So, steer clear of Jack’s 10 Ways to Kill a Deal.
1. Time. Back in Jack’s Rules to Live (Work & Play) By, we learned that Rule #1 is Time Kills All Deals. It’s still true. If you can’t act swiftly without a swift kick to the behind, then hire a business broker to do just that. And those deadlines in the LOI? They’re not “suggestions” – they’re DEADlines. Treat them like it.
2. Dwelling on the LOI. LOI = Letter of Intent. NOT Letter of (every little thing I can think to) Include. Too much detail can lead a court to hold your “non-binding” LOI is actually an enforceable document. Just ask Texaco. Get the basics down and then dive in.
3. Talk, Don’t Walk. Effective Communication is key, and absolutely must begin in the early stages to set the scene. If things break down, come back to the table and talk them through.
4. Hire the Right Professionals. Don’t let your consultants, attorney or brokers become the obstacle to a successful closing. Choose someone who views their role as your counsel to closing the deal, not the last hurdle towards you and your next adventure. The right professional will advise you on your risk, but the ultimate decision is yours.
5. Due Diligence is a Two-Way Street. Due Diligence just doesn’t occur on the Buyer’s side; if you’re selling, you should be inspecting your potential Buyer just as closely. The earlier on you do this, the better you can assess whether this Buyer is qualified to buy and prepared to successfully run the business.
6. Mergers & Acquisitions are a Process, not an Event. Rome wasn’t built in a Day. You have to have patience, understanding and a good sense of humor throughout the process. Work with your advisors to identify your greatest areas of risk and reward, and communicate those efficiently and effectively to the other side. There will be points of negotiation, but with a little patience and effective communication, you’ll navigate those quickly.
7. Clean House. You would clean up your house before you sold it, right? Why woudln’t you do that for your business? Prepare your corporate, financial, personnel, inventory and business records so that you can explain your business in a confident, accurate and knowledgeable fashion to potential suitors. Plus, it’ll make Due Diligence a SNAP. Your attorneys will love you.
8. Be a Sophisticated Seller. The ease and speed of the process is directly related to the sophistication of the Seller and its counsel. Before beginning the process, ask your advisors to give you M&A 101. They should be able to walk you through the whole process, start to finish, so that once you’re in the middle, there’s no surprises.
9. Overpricing. Have your business assessed by an independent third-party familiar with your industry. From there, you can make an educated and informed decision about the asking price for your business.
10. Balancing Risk. Take a look at the forest before the trees and assess your total risk in the transaction, rather than individual provisions. Ask yourself: Is the risk balanced proportionally between Buyer and Seller? Check out the overall the risk apportionment between warranty, indemnity, survival and any residual or continuing liability or escrow.
Are you ready? We are! Now that you know Jack’s 10 Ways to Kill a Deal, you can avoid these landmines and your merger or acquisition will be smooth sailing. Be sure to visit us again 9.2.2011 for the 2 cents on our September Legal TENder!
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