Competent business attorneys are a great addition to your team of advisor’s when buying or selling a business.
Attorney’s can cover your assets and help make a well structured deal, air-tight. When it comes time to draft agreements and close a deal you have to take precautions that you are not leaving any loose ends. You do not want any loopholes left open in your purchase agreements, stock sales, leases, or otherwise have any business liabilities that could come back to haunt you in the future.
When looking for a business attorney to help you with the purchase or sale of a business it is a wise choice to use an attorney with acquisitions or corporate transaction experience.
Oftentimes a party will have a relationship with the family attorney who does a great job handling matters of taxes, real estate, wills and things of this nature, but will end up winging-it when assisting a buyer or seller of a business. Buying or selling a business requires a specialist.
Corporate transaction attorneys will help you with your letter of intent, employment agreements, and non-compete agreements. They will guide you in due diligence by reviewing loans and leases.
The buyer’s attorney will customarily draft a purchase and sale agreement and take care of the closing procedures for his party.
If you’re retaining a general practice attorney to handle this for you, you’re really just paying for your attorney’s education. Just like there are doctors that specialize in all forms of medicine. The vast areas and specialties of law keep any single attorney from being good at all of it.
A real estate attorney will seem like a natural choice as well, from the sense of “Closing” a deal, especially in the case where smaller business a real estate broker is representing a party, but you still have to answer the question of competence handling the sale of a business or corporate entity.
Use your best judgment.
By: Jason L. Pittman
Archive for February, 2010
Business Attorneys – What Is Their Role When Buying And Selling A Business?
February 27th, 2010Startup Fundraising – Do You Know Who You Are Talking To?
February 26th, 2010
Venture capital, private equity, mezzanine debt, venture debt, angel money, investment bank? What’s the difference and who are the players? Many people start looking for funding and become involved with investment bankers or business brokers without really understanding what they are looking for or who they are talking to.
Venture capital
Venture capital firms (VCs) raise money from limited partners and invest the money in companies for a share of the ownership. This is not so different than investing money in the stock market: you buy shares and have a say in how the company is run (abet a tiny say – that’s what the proxy is for). With VCs, it’s a private transaction and they require a significant amount of control. They are, however, not interested in running the business on a day to day basis.
Angel Money
Angels are individuals who invest their own money in a company for a share of the company. The amount of control the angel wants usually depends on the sophistication of the individual and the interest he or she has in being involved in the company. Some angels will invest and come in as management, some will invest and stay very hands off in the management of the company.
Private Equity
Technically, private equity is any ownership stake purchased through a private transaction, which includes VCs and angels. However, as the private investment market matured during the dot.com era, private equity has come to mean late stage companies that invest large dollars for a significant stake with the intention of preparing the company for a future IPO or sale. This term also includes leveraged buyout firms.
Venture Debt
Venture debt is a funding source that does not require an ownership stake in the company (although they do normally want warrants). Similar to venture capital, it is for early stage companies that are interested in funding expansion. They require a high interest rate and some control over the company, usually in the form of covenants.
Mezzanine Debt
Like private equity, mezzanine debt tends to be for more mature companies. The interest rate is usually high and warrants are usually required. Mezzanine debt will be subordinated to bank debt, but will have a claim on the assets of the company senior to the shareholders.
Investment Banks
Contrary to their name, investment banks neither invest nor do they lend. They are interested in transactions between companies and initial public offerings. They use their knowledge and experience to market the company to the public and to other banks (who will then sell the shares to investors) and are paid a fee for this service. In general, investment banks are intermediaries and not interested in holding ownership stakes themselves.
Business Broker
Like an investment bank, business brokers are not interested in investing money. They are interested in finding a buyer for your company. They usually have numerous industry contacts and have a good understanding of the value of the company and what are current purchase structures.
If you have decided that it is time to raise money for your company, you must decide what you want ultimately. If you are ready to get out of the business, you want an investment bank or business broker. If you are planning on taking your company to the next level and growing it to an IPO, then you are probably looking for venture capital or some sort of debt. If you are interested in readying the company for a big sale, then you may be looking for a private equity firm. Understanding what you want is the key to getting the most value out of your company.
By: C. Worrall
Seven Critical Questions You Must Ask Before Trusting Anyone With the Sale of Your Business
February 24th, 2010
ONE – Do they offer any form of guarantee of your total, unconditional satisfaction from your very first meeting?
TWO – Are they an independent organisation of specialist business-sales professionals, (not merely operating as a sub-division of an accountancy firm or, more disturbingly, an estate agent)?
THREE – Will you team-up with a professional qualified business broker from the outset (not a sales rep) who’ll work closely with you throughout the complete selling process, as a true mentor and impartial adviser?
FOUR – Do they get rewarded solely on achievement and only on the successful completion of the sale of your business, without imposing any additional charges?
FIVE – Will they keep in touch and regularly update you on the progress of the sale of your business, at least once every two weeks?
SIX – Do they painstakingly verify potential buyers for commitment and the ability to finance the purchase before introducing them to you, so as not to waste your time?
SEVEN – Do they assign a professional business broker to you who has several decades of experience in selling small businesses? (The average age of a proficient business broker is 55… for good reason).
5 more, “not-so-critical” but equally important questions…
Will your chosen adviser actively promote, market and advertise your business to potential buyers (not simply post it on the internet then sit back in hope and wait for enquiries… if any)?
Can they demonstrate they are thorough and conscientious in safeguarding your confidentiality at all times?
Will they attend, conduct and ‘chair’ all meetings between you and potential buyers of your business?
Are they active members of a reputable, well respected, business broker association and do they rigorously abide by its code of ethics?
And last but not least… do you like and trust them?
By: David Mattocks
