When taking on the sale of your business it is important to have a highly qualified team in place. Outside of your business broker, we recommend sellers work with a finance professional as well as an attorney. Selecting an attorney to represent the sale of your business, goes far beyond simply Googling transactional attorneys. You will want to make sure that the attorney you choose has the right experience to be qualified to advise you during the sale process. To help you in this process, we have developed some guidelines for identifying an attorney that will represent you and your business well.
Guidelines for Selecting an Attorney
Ask the attorney if they have had direct, recent experience facilitating the sale of a business. This is the most important question you can ask a prospective attorney, and if their answer is “No,” than they aren’t the right attorney for the job. Working with an attorney experienced in the ins and outs of a business sale is key to a smooth and well received transaction. If they have industry experience, than they will already be familiar with the issues involved in a sale, fair contract terms, and will have historical experience to pull from during negotiations. And if you’d like, you can drill down even further by finding an attorney versed in your business’s size and industry.
Next, it is important to take into account the attorney’s negotiating tactics, so you can select someone with a similar risk and reward modus operandi. Effectively, this will help you choose an attorney who will negotiate with your best interests in mind. Do you want an attorney that will put their foot down on each detail of the transaction, or someone who will make room for compromise as long as your most valued terms are met? Neither is right or wrong, but clashing with your attorney’s way of operating will not help push the deal forward in a positive manner.
Finally, how important is your attorney’s fee structure in the grand scheme of the transaction. If you’re purchasing a multi-million dollar, distribution company, cost will likely be less of an issue than if you’re purchasing a small, scale convenience store. But either way, it is important you understand up front how you will be billed for your attorney’s services.
The following options are the most common billing structures:
Hourly or Per Diem Rate. Most attorneys bill by the hour, and can often provide an estimate of hourly costs in advance of services rendered.
Flat Fee. Some attorneys suggest a flat fee for certain routine matters like contract review.
Monthly Retainer. A monthly fee may be a good option, if you anticipate a high number of routine questions and will require priority access to your counsel.
Contingent Fee. For complex matters (or plaintiff-side lawsuits), lawyers often work on a contingency basis where they receive a percentage of the proceeds (typically 25-40%). If they fail, they generally receive out-of-pocket expenses. This is a highly unusual form of compensation for representation of a business transaction.
Value Billing. Some attorneys bill at a higher rate for services they obtain a favorable result for. Try to avoid lawyers who use this method, which can sometimes be referred to as "partial contingency."
During the sale process your attorney will provide support and service for the following matters.
Corporate Formality Support to confirm all documentation is up to date, filed properly and integrated into the transaction according to the terms of the law.
Contract Drafting and Negotiation to aid in structuring, negotiating, and documenting the terms of the business sale.
Financial Support to ensure the structure and terms of the financial servicing of the sale are sound.
Closing and Post-Closing Support to make sure all t’s are crossed, i’s dotted, and funds are exchanged.
The final measure of qualifying a transactional attorney will be the reference check. Never shy away from asking for references, especially in the instance of something as important as the sale of your business. A good attorney will give you necessary guidance and counsel but a qualified transactional attorney will be invaluable at the closing table and beyond. If you would like to speak with a broker about the sale of your business or are in need of an attorney recommendation, we invite you to schedule a complimentary consultation today.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree in Global Interactions from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high life!