Cautionary Tale #9: Manage Your Attorney
With a title like “Manage Your Attorney” in a series called “Cautionary Tales” you might wonder if we are teeing up that line from Shakespeare’s Henry VI, Part 2: “First thing we do, let’s kill all the lawyers.” Not at all. Some of our team here at Apex are married to attorneys, or were raised by them. We work with attorneys on every single deal.
What we want to make sure is that buyers and sellers remember that ultimately, it’s their deals that are on the lines, and that attorneys are meant to be advisors, not parties, to these deals.
Remember that part of the skill set that any entrepreneur has to gain if he/she doesn’t already have it is risk management. Entrepreneurs look at given situations, sometimes with incomplete information or risk assessments, and make decisions. Up to the time of that decision you want to gather all the information you can, but then you have to move forward on your own.
Not Signing an NDA
One of the first things new clients do with us is sign a non-disclosure agreement. We are going to be sharing confidential information, including a private company’s financials and tax returns, and sometimes other sensitive information. We have to have the assurance that you will not make this private information public.
We didn’t make up our NDA on our own. We had lawyers help craft it and it’s the same NDA we give to all our clients. It’s not negotiable.
On more than one occasion, we’ve not even got out of the starting blocks. “My attorney told me not to sign this,” we’ve heard. Well, then there’s nothing to talk about.
We are not going to share confidential information with someone who won’t sign a confidentiality agreement, period. If you find yourself in this situation, you might need another lawyer or you might need to ask yourself if you’re serious about buying a business.
Not Negotiating Franchise Agreements
One horror-story variant of refusing to sign an NDA was one time when a client racked up $10,000 of changes to a franchise contract.
Now think about this. Franchise contracts are meant to apply to dozens, hundreds, possibly thousands of franchisees. What is the likelihood that they are going to make the changes you requested for your contract? And that others won’t find out and demand expensive redrafting of their existing contracts?
The attorney who dealt with this was not someone skilled in M&A but happened to be the equivalent of the “wife’s brother’s friend’s uncle.” Do not pick an attorney for a business transaction based on anything other than someone’s experience and expertise in M&A and business transactions.
Whatever money you “save” or relationship you establish with this individual is not going to help you with the relevant goal in this situation: a business transaction. Choose wisely, or risk the chance of large bills with no payoff.
Not Acting Nimbly On a Deal
On more than one occasion a client has expressed interest in a deal and we’ve called them to let them know other buyers are putting in offers and that the clock is running down. Sometimes we get the answer: “my lawyer’s still working on the LOI.” While that’s certainly one way to go about things, here at Apex we use a signature service called Offer to Purchase (OTP) that speeds this part of the process along.
While an LOI might be fine, there’s no need to reinvent the wheel (and pay the billable hours necessary to reinvent said wheel). Our OTP covers the major elements of an offer and is easily amendable with additional details as needed.
With delays, deals die, and if you are stuck worrying about the precision of your LOI you might miss out on a great deal. In the meantime, those clients who use our no-charge OTP service have already submitted and are on to other things.
In all these cases, attorneys were doing what they were trained to do: flag up risk. But that’s not what entrepreneurs are trained to do or what they execute on every single day. They look at the risk assessment and make decisions. For them, attorneys are assets/counselors who empower them to make decisions, not jailers who tell them what to do.
Manage attorneys in a business transaction or they may manage you out of one.
Need an attorney with M&A experience as opposed to your wife’s brother’s friend’s uncle? We have a whole list of them. Give us a call and we can share them with you.