Timing is everything. There is a time to hire an attorney and other times when it may not be appropriate. Keep your expectations real and get quotes prior to hiring an attorney to navigate the transaction.
Before you sign an Asset Purchase Agreement you will want a transactional attorney to review the document and add their legalese to make sure you are protected and indemnified properly. Some deals are more complicated than others. It may be the size of the deal that requires the attorney from the beginning or it may be an Asset Purchase vs. a Stock Sale in which the attorney will be the one to draw up all documents.
On a recent transaction, we had the Asset Purchase Agreement signed by both parties agreeing to all terms with only the landlord to contact regarding the assignment of the lease. That is when the buyer hired an attorney. This didn’t make the Seller happy because the attorney wanted to rewrite the entire lease and not take the assignment even though there was 3 years left, plus a 5 year option. The buyer was caught in between wanting to keep a good relationship with the seller and to close as soon as possible vs. listening to her attorney.
Many business brokers discourage their clients from using attorneys but I disagree. Since we are not lawyers nor accountants I think it keeps the deal moving forward working with a team of experts. The only time I see it as a possible deal breaker is when you are not using a transactional attorney or a CPA who is a personal accountant vs. one that understands small business.
We had a client that went online and found an attorney there, never asking the broker for a referral. The attorney had little experience in this arena and ended up charging over $60,000 before the deal was even consummated. He is what we call a “Deal Breaker” vs. a “Deal Maker”. A Deal Breaker wants to win every war, and make the other party wrong without any reasonableness. You should also consider using an in-state attorney vs. one from out of state since laws vary especially where leases are concerned.
Get a referral from someone in the Industry, your Intermediary or your business CPA. They know who is good and who isn’t. It’s even better if the attorney’s name comes up a few times. It can make the difference of you getting the transaction that you want done or not.
If you have any questions, feel free to contact Joan Young, President of Sunbelt Business Brokers, Greater Bay Area – [email protected]. Sunbelt also handles Mergers and Acquisitions.