The attorneys at Echo Hawk & Olsen have guided our clients through the process of buying and selling their businesses. Whether you are considering a sale of an entire company, any of its divisions or assets, shares or membership interests, or if you are looking to merge with or acquire another entity, we have the resources and a history of delivering results. We can assist in many key ways.
Non-Disclosure Agreements or “NDAs” are essential to allow the party to discuss the possible transaction freely while obligating the parties to maintain sensitive business information and trade secrets. Letters of Intent outline the general terms of a proposed transaction and are usually entered concurrently with the NDA.
Due diligence is the formal process by which each party examines the ability of the other party to deliver on what was promised, and to create protective firewalls to prevent surprises, to either side, once the deal is done. Not surprisingly, it may require a considerable expenditure of time and analysis on the part of both parties’ legal teams. Although due diligence is typically an extensive management and/or process, it allows us to learn what our clients truly seek to accomplish by the deal, and to counsel our clients on potential benefits and synergies versus the potential risks and exposure of consummating the deal with the other side.
On the buy side, we work with our client’s management team and its senior financial and technical professionals prior to committing the client to the contemplated purchase. This includes a review of contractual, regulatory, financial, and technical obligations as well as an analysis of insured and uninsured liabilities of the target venture.
On the sale side, our due diligence representation lets the seller not only meet its disclosure obligations, but also determine the buyer’s willingness and ability to perform. This means not only making clear and meaningful disclosures to expedite buyer’s due diligence, but also conducting a reverse due diligence on the potential purchasers and structuring the deal accordingly. In a competitive market space, the seller needs protection against the possibility of a purchaser who is using the process merely to gain insider information about the market or even trade secrets that the seller may have developed. Due diligence provides the parties with meaningful information to intelligently negotiate the deal and is what lets business decision-makers reduce the chance of an unexpected lawsuit.
Sometimes, initial discussion, due diligence, or inadequate seller disclosures make it clear that the purchaser should not purchase equity in the target venture, i.e.,while the purchaser still wants to pay for value from the target, it does not want to purchase the corporation’s shares or the LLC’s membership interests. In such an event, we can restructure the deal to allow for only the acquisition of assets, property, licensing rights, customer lists, intellectual property, and other tangible and intangible property of the target venture, while leaving the equity (and the liability) of the venture with its existing owners.
There is no simple formula or stack of forms that will let someone divest or acquire a new business or venture. However, our attorneys have worked closely with our clients, in a variety of unique and complex business purchase and sale structures, to counsel our clients to balance their risk tolerance and potential benefits of the transaction. Choosing the right path to purchase is vital, because once the deal is penned, surprises have an economic impact on the buyer, seller, and target venture itself. If this impact is significant, it will result in a drawn out and expensive courtroom battle. Although every deal carries risk with opportunity, and no business acquisition can be absolutely bulletproof, our experience in this area helps us counsel our clients how to obtain assurances, offload risk, and maximize net return in buying or selling a venture.
Often, the sale of a larger, long-held business can add an emotional dimension that lasts long after the ink dries on the contract. This is especially true if the business was family-owned for multiple generations, or if the founder grew the business from nothing over many years. Our experience in these delicate business succession scenarios gives our lawyers first-hand practical insight into the extra steps needed at the deal side to ensure the transition is a smooth one. Aside from words on the page, our lawyers understand that long term management, ownership, and loyal customers of the target business must be addressed not only with analytical foresight, but also with respect and tact.When working with buyers in such cases, we work to secure the cooperation of management and the previous owners (the sellers) to incentivize cooperation, maintain reputation, facilitate the retention of value through the succession period, and structure remedies to quickly enforce any post-closing actions that would undermine the spirit and principle of the deal. When working with sellers, we will work to make sure the departing owners and management maintain the appropriate reputation and contractual freedom to move onto the next chapter of their lives without being unduly weighed down by the sold business.
Our active involvement in complex commercial litigation over similar deals continues to provide its corporate team with unique insight into the consequences of deal terms. Simply put, beyond merely running checklists of deal terms, we know the very real post-sale consequences of “over promising” or “false assurances,” and know how to steer its clients clear of those issues so that our clients always leave the negotiating table with their eyes open. We have more than two decades of experience in deal making allow us to provide valuable counsel to either party to the transaction, to serve as the coordinating team among the various professionals necessary for complex due diligence, and to advise our clients of the potential risks and advantages of the possible transaction.
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Considerations on Buying & Selling Your Business