By Cliff Ennico
"My partner and I own a service business we've been trying to sell for some time. We finally found a buyer, but the process just seems to be taking forever. The buyer's attorney seems to be taking a long time to review our attorney's draft documents, and our attorney doesn't seem to want to push things as fast as we want him to. We've explained to him that 'time kills deals,' and we're really worried that the deal will fall apart if pressure isn't constantly being applied to get things done. Do you agree, or are we missing something here?"
You are right, of course, about time killing deals. But pushing things faster than they're able to go can kill deals just as easily.
I assume you are selling the assets of your service business, as that's how most of these transactions are structured. An asset sale transaction has a lot of "moving parts
" that all have to synchronize before a closing can take place. For example:
- Your landlord will need to consent to the buyer's assuming your existing lease of your business premises, and they probably will want to see financial statements from the buyer and other documentation so they can comfort themselves his credit risk is the same or better than yours.
- You will have to get consents from any leasing companies from which you lease equipment.
- If your business is a franchise, you will have to get the franchisor's consent.
- Your accountant and the buyer's accountant will have to agree on allocating portions of the purchase price to specific asset categories for tax purposes.
These things can't be done in a day or two. In my experience, it generally takes four to six weeks to close a sale of business assets from the date you and the buyer initially agree on the purchase price. Pushing any faster than that can be very counterproductive.
If there is a real urgency in closing your deal by a specific date, by all means you should communicate this to your attorney so that he can communicate it to the buyer's attorney. That may help move things along. If there is no such urgency, however, I would advise you to "cool your jets
" and let your attorney and the buyer's attorney work through the details at a reasonable pace.
Here are four rules I live by when it comes to getting deals done. Rule # 1: Deals always go more smoothly when the attorneys work together as a "team".
Contrary to popular opinion, this is one arena in which you and your attorneys should not be aggressive or adversarial. It's the buyer's money, after all, and he should have sufficient time to understand what he is signing, and the obligations he is assuming. By pushing him too hard to close quickly, you will get him (and his attorney) very nervous. The buyer will begin to suspect there are skeletons in this business' closet, and will conduct his due diligence with an electron microscope instead of a magnifying glass. The buyer's attorney will start worrying about his malpractice liability, and will be sure to get his back up, raising unnecessary issues and "nitpicking
" the documents in an effort to slow things down and protect his client. Rule # 2: If the other side asks for something reasonable that doesn't hurt you in any way, don't waste time arguing about it. Say "yes," and move on.
You want to get closure as soon as possible so that you and the buyer can focus on getting all the closing paperwork pulled together. If you are still negotiating the business deal at the closing table, something has gone seriously wrong with the transaction. Rule # 3: If the other side asks for something unreasonable or that does hurt you, then ask why they need it.
Don't say "no
" automatically when the other side asks for something you can't say "yes
" to. Instead, ask "why
". A lot of times the other side really doesn't care too strongly about the point, and will drop it. Even if they don't, once you understand fully the other side's concern, you will find there's usually a compromise position that will satisfy that concern without hurting you.
But don't be a wuss. If the other side's position doesn't make sense, say so. Rule # 4: Never try to close a deal in August.
A lot of people try to get deals done in August because they figure everyone will have more time to focus on the details, but in my experience that never happens. No sooner has one player returned from vacation than another one leaves on vacation. If you can't get the deal closed by the end of July, schedule the closing for sometime after Labor Day and head for the beach. Everyone will appreciate that you are not trying to disrupt their precious time off, and that goodwill will pay dividends when negotiations resume.
), a leading expert on small business law and taxes, is the author of "The Crowdfunding Handbook
," "Small Business Survival Guide
," "The eBay Seller's Tax and Legal Answer Book
" and 15 other books. Permission granted for use on DrLaura.com.