"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 he probably will want to see financial statements and other documentation for peace of mind that the buyer's credit risk is the same or better than yours.
—You will have to get consent 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 from the date you and the buyer initially agree on the purchase price to close a sale of business assets. 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 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 No. 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's closet and will conduct his due diligence with an electron microscope instead of a magnifying glass. His 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 No. 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 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.
Rule No. 3: If the other side asks for something unreasonable or something that does hurt you, then ask why it's needed. 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 it doesn'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 No. 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.
Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our webpage at www.creators.com.
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