This is not a new issue in our experience, but an important one to revisit. For us this typically is an issue with attorneys who are brought in late in the process and then overstep their role of legal counsel to revisit agreed upon price and terms or simply lack the sense of urgency most transactions require. Sometimes it is an attorney who is a bit over alarmist and draws incorrect assumptions prior to having all the data and sometimes it is an overzealous attorney who has the approach of a divorce attorney rather than that of a contract of M&A attorney. We had a particularly tough year last year in regard to what we would call “rogue” advisors who almost undermined several transactions.
In two occurrences, the buyer’s attorney either completely disregarded or dramatically altered the initial Purchase and Sale Agreement we provided, a time-tested attorney-drafted template we populate with agreed terms in an effort to keep the parties’ cost down. This is their purview and fine for them to do, except that in both of these instances they actually removed key components of agreed terms, created ambiguity as to how price was calculated, and removed key considerations that protected both the seller and the buyer, the latter being their client.
In another occurrence, it took the buyer’s attorney more than two months to return a revision of the initial Purchase and Sale Agreement to the seller and the seller’s attorney. Later in that same transaction we were involved in some last minute adjustments that had to be agreed upon between the seller and buyer prior to funding in 36 hours. We were on a dozen separate calls with both parties to finalize terms and we were up until midnight drafting a resolution the night before funding, and then on a call at 6 am the next morning to connect with the buyer (who was in the eastern time zone) to confirm agreement and funding was coming through. So a lot of urgent work in 36 hours because time was of the essence or the deal was going to fall apart. The seller sent the resolution to her attorney and he and the buyer’s attorney then proceeded to spend four days going back and forth to finalize it… and guess what, the terms of the final resolution were identical to what was provided to the attorneys days earlier. So the result was two attorneys who wasted precious time, drove up their billable, delayed closing and funding, put the transaction at unnecessary risk, and added nothing to this last step of a long process… none of which was in either the seller’s or buyer’s best interest.
In every one of these examples, the seller or buyer failed to manage their attorney and keep in mind that they were the client and the ultimate decision maker. We deal with a lot of great attorneys who have a clear understanding of their role and their client’s best interest, but there are still quite a few out there who simply don’t seem to get it. When you engage an attorney on a transaction, we would advise you to clearly define what you require of the attorney. Have them talk directly with any broker or key advisor who has been an intermediary in the negotiations so they have a complete understanding of the development of terms and conditions to date. And be sure to manage them so they are focused on serving your best interest in a timely manner. Remember, this is your sale or acquisition, you have made the decision it is in your best interest, it is your attorney’s job to see it through not to undermine it.
ProHorizons is a West Coast brokerage and consulting company focused on tax and accounting practice sales and acquisition services.
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