Published May 10, 2019 by Scott W. Taylor
If you’re an owner who is selling your business, but have never sold a business before, you may have some questions about what professional advisors you need on your team. For any successful business sale transaction, you need a Mergers & Acquisitions attorney. On the ExitReadiness Podcast, SmolenPlevy Business Attorney Scott Taylor discusses the role and responsibilities of a M&A attorney in a sale transaction.
Taylor says there are generally five phases of a business sale transaction:
- Phase 1: Preliminary discussions. Discussions can start as simply as a buyer and a seller meeting to see if it makes sense to join forces.
- Phase 2: Due Diligence. The parties are moving toward a transaction and exchanging information, The buyer is getting up to speed on the target business.
- Phase 3: Definitive documents. In this phase, the parties are negotiating the definitive documents that will actually paper the deal.
- Phase 4: Closing. The parties are comfortable with the deal and set to go.
- Phase 5: Post-closing. Depending on the structure of the deal, you may have earn-outs and holdbacks, as well as possible indemnification claims Often times the sellers are still involved as employees in the business moving forward, which could result in some issues.
If a business owner is thinking of selling their business, Taylor recommends you seek an M&A attorney as soon as possible. “Realistically, because of schedules and the way transactions roll out, it doesn’t happen until a little further down the road than most attorneys would prefer,” says Taylor. “But generally speaking, find an attorney as soon as possible.”
Get an attorney involved before you start exchanging confidential information, such as financial information and confidential business information. You want to have a confidentiality agreement in place early on.
Legal implications can happen a lot sooner than sellers realize. The job of an M&A attorney is to provide legal advice, close any loopholes, and watch out for potential pitfalls that may become larger legal issues if they’re not addressed.
Listen to Scott Taylor on the ExitReadiness Podcast:
