Your acquisition goals are simple: sell fast and for the highest price. To this end, good legal counsel is worth their weight in gold during the acquisition process. Legal is, by far, the aspect of an acquisition that inspires the most dread. Few have the skills to navigate it, and fewer still enjoy it. Common sense dictates hiring a professional instead.
Think of your acquisition as a game and legal counsel your quarterback. Your attorney interfaces with all other parties involved in an acquisition, directs and advises, changes directions when necessary, and pushes the deal forward. In other words, you increase your chances of achieving your goals and have more time to focus on your startup.
Here’s a brief overview of how a legal advisor can help expedite your acquisition.
Draft and Negotiate Acquisition Documentation
Acquisitions involve a lot of legal jargon and paperwork: letters of intent, purchase agreements, earnouts, indemnification caps and baskets, restrictive covenants, and lots more. Legal documents are dry, complex, and extremely difficult to understand, and it’d be reckless to try to digest everything alone, and you’d probably risk the acquisition, too.
A legal advisor, such as an attorney, will draft, review, and negotiate acquisition documentation for you. They’ll sit down and explain everything in layman’s terms, which gives you more time to invest in meeting your startup’s growth targets. Meanwhile, your attorney will exchange drafts (called “redlines”) with the buyer’s counsel until they’re mutually acceptable to both of you.
Interface with Specialists (When Needed)
Since every acquisition is different, your startup might require specialist expertise that your attorney can’t provide. You might need taxation or securities law advice, for example, and your attorney can recommend the appropriate, vetted professionals from their Rolodex. A lack of expertise could delay the acquisition, so it pays to have the right person for the job.
Respond to Due Diligence Requests
When Andrew Gazdecki, our founder, sold his first business, he received over 800 due diligence questions to answer, corroborate, and document. It took his management team over a month to finish it all. Yours might not be as brutal, but if you underestimate due diligence, you risk delaying or derailing your acquisition and breaking down with the stress of it all.
An attorney will handle all of this for you and answer the buyer’s supplemental due diligence requests, too. There will also be technical requests and questions you’ll struggle to answer but will be easy for an attorney. As we’ve written before, a legal advisor could pay for themselves many times over in saved time, resources, and avoiding fatal errors.
Organization
You’ll have guessed that a successful acquisition depends a lot on organization. I’d go so far as to suggest it could kill a deal or at the very least delay one. You might consider yourself an organized person and that might be true. But can you organize two full-time tasks at once? The acquisition process and operating your startup?
Even the most fastidious people need help, especially when there’s a life-changing amount of money at stake. Good legal counsel will keep detailed checklists of all the moving parts of your acquisition and ensure everything goes smoothly. It’s their job to retain total focus on the acquisition and its success and yours to continue hitting your growth goals.
Minimize Post-Closing Risk
I’m sure you’ve daydreamed of life post-acquisition. You might start another business, spend time with friends and family, or even take early retirement. Whatever your plans, the last thing you want is the acquisition going south months after closing when you’re busy living or building another startup. Nothing spoils the joy of a new life like a buyer dispute or litigation.
An attorney, however, can help prevent this from happening. With their expertise, they can spot and resolve legal issues before they ever become a problem, giving you the comfort and reassurance to enjoy life after you’ve sold your startup.
Drive the Deal
Acquisitions have many moving parts, and as such, require someone to drive the deal forwards. This person is rarely a founder since they (usually) lack the requisite skills to manage the transaction. Most of the time, the person driving the deal is your attorney. A good attorney will have excellent soft skills and generate all the momentum to close the deal.
You might’ve heard the phrase, “Time kills all deals,” and it’s your attorney’s job to make sure it doesn’t kill yours. Delays increase the chances of something unexpected occurring over which you have no control. A new regulation or competitor arising in the market, for example, could derail or devalue the acquisition, and without a crystal ball, you’ve no way of anticipating this.
If you hire just one professional to help expedite your acquisition, an attorney would be a good call. Legal is a minefield for most founders at a time when emotions are already running high. Swap anxiety for a legal advisor, and the acquisition needn’t be as tedious and slow as you expected it to be – you might even sell at a higher price, too.
With over 50 M&A advisors to choose from, you now have all the help you need to get Acquire’d right here on our platform. To hire a legal advisor, check out Acquire.com’s Advisor Directory.
The content on this site is not intended to provide legal, financial, or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.
