Choosing the right representation can make or break a business sale transaction.
So you have decided to sell your business and have already signed with an accomplished broker, what should your next step be? Selecting an attorney to represent the sale of your business will give you the upper hand during the deal making process.
Selling your business can be complicated, add to this the stress of preparing for the transaction, your emotional investment in the business, as well as finances and the undertaking, can go south quickly. By hiring an attorney, you can alleviate some of the situational stress and enjoy the expertise of a professional. An attorney will be able to perform or provide:
- Corporate Formality Support (Confirm documentation is up to date, filed properly and integrated into the transaction according to the law).
- Contract Drafting and Negotiation (Aid in structuring, negotiating and documenting the terms of the sale).
- Financial Support (Additional attention should be paid to the structure and terms of the financial aspect of the sale).
- Closing and Post-Closing Activities (Make sure all documents get signed, including ancillary documents, and money exchanges hands).
Hiring a great lawyer initially is easier said than done. In the following discussion, Transworld will present you with a number of questions to discuss when interviewing and selecting a lawyer to represent the sale of your business.
Do you Have Direct Experience Supporting the Sale of a Business?
The first and likely most important question to ask your prospective attorney is, "Do you have any experience?" If the answer is no, then move on. An attorney touting experience in the area of your need is key to having a positive and smooth transaction with them. Moving a step further an attorney with experience in your industry, with your business size and deal complexity will ensure the highest level of quality. Then you can even get into if your attorney has an understanding of the soft issues involved in the sale of your business - your employees and their families, pensions, benefits, etc. An attorney with finely honed experience will share the same concerns as you and will be able to approach the situation with the knowledge of previous similar sales in hand. Even still experienced deal attorneys know what fair contract terms are for different types of transactions, and can use their data from past deals to get all sides to efficiently reach a fair agreement.
What is Your Approach to Negotiating and Deal Making?
This question takes into account how you would ultimately like the sale of your business to turn out. How does your prospective attorney think and how will they choose to negotiate the trade-offs between risk and reward. Would they be characterized as constructive and collaborative or do they consider a successful negotiation based upon winning all points at all costs? Are they the type of attorney that is going to zero in on the key and most impactful terms and conditions, or are they going to try and nail down every conceivable risk imaginable? You will want to decide on an attorney who approaches the deal effectively how you would. This will ensure that when it comes down to it they will be negotiating with your best interest in mind.
What is Your Fee Structure?
Fee structure can be a deal breaker even with all other things considered. Nailing down exactly how an attorney plans to bill you will ensure that they will deliver the outcome you want at a price that won?t shock you at the end of the day. The following options are the most common billing structures:
- Hourly or Per Diem Rate. Most attorneys bill by the hour, so that you only pay for the services you use. If travel is involved, they may bill by the day. Even when working at an hourly rate, most attorneys can give estimates for how long they think various parts of a transaction will take.
- Flat Fee. Some attorneys suggest a flat fee for certain routine matters, such as reviewing a contract or closing a loan.
- Monthly Retainer. If you anticipate a lot of routine questions and need priority access to an attorney, one option is a monthly fee that entitles you to all the routine legal advice you need.
- Contingent Fee. For plaintiff-side lawsuits or other complex matters, lawyers often work on a contingency basis. This means that if they succeed, they receive a percentage of the proceeds, usually between 25 and 40 percent. If they fail, they receive only out-of-pocket expenses. This is highly unusual for representation on business transactions.
- Value Billing. Some law firms bill at a higher rate on business matters if the attorneys obtain a favorable result, such as negotiating a contract that saves the client thousands of dollars. Try to avoid lawyers who use this method, which is also sometimes called "partial contingency."
The final measure of your attorney will be the reference check. How better to understand an attorney than through their previous clients and peers. This will shed light on how they will eventually conduct business.
The Ultimate Counsel
A good attorney will give you guidance and counsel but an attorney specifically versed on the ins and outs of selling a business similarly aligned with your own, a great attorney, will put you on a path to a successful and satisfying transaction, by your own standards.
If you are interested in learning more about hiring an attorney to represent the sale of your business or for a referral to an attorney please visit our website at www.tworlddenver.com. For a complete look at the Transworld service offerings, visit our website or if you are interested in discussing the attorney selection process more schedule a consultation today!
Al Fialkovich is the Managing Director at Transworld Business Advisors of Denver. In his role, he oversees a team of brokers and the sale of an average of 25-30 small to medium size businesses each year. His focus has always been on running seamless transactions, fostering constant and honest communication and maintaining strong relationships with his clients. This commitment has earned Al multiple awards for Transworld, but most of all it has brought him true satisfaction in his career. If you are interested in buying or selling a business contact Al today!