No, Don’t Kill All the Lawyers; Hire the Right One

One of the things overlooked by so many sellers is the critical importance of hiring a highly experienced M&A lawyer. In the scores of transactions we have managed, this is the area in which sellers have gone awry more than any other.

They generally want to save money by going with the lawyer who charges the least on an hourly basis. This never works because you get what you pay for here, just as with every other service you buy. A seller actually saves money by hiring a highly experienced lawyer. Those lawyers can do a better job in less time than an inexperienced lawyer. The overall cost is less than what a lesser experienced lawyer charges. And the key with your lawyer is having a frank discussion with them, agreeing on a budget, and then regular communication managing to that budget.

In an effort to stay in their comfort zone, many sellers want to use lawyers they know, lawyers they have used in the past, regardless of the type of transaction. When they ask the lawyer they know if they can represent them on an M&A transaction, the natural response by most lawyers is, “Sure, I can do that.” Trouble begins to brew. No, you want a lawyer who only does M&A transactions, and has done scores, or hundreds, of them. Be empowered to demand that, even if lawyers friendly to you are asking you to “settle” here.

The legal management of a business sale transaction is highly challenging, far beyond the capabilities of any lawyer other than those that practice in this area regularly. We can’t emphasize this point enough…hire a highly experienced M&A lawyer.

A few years ago, we represented the seller of a company who insisted we use his local lawyer who had very little M&A experience. We reluctantly went along with this but agreed after the transaction that we would never allow a client this latitude again. The lawyer turned out to not have the depth of experience needed for the transaction and went quickly to a place of fear. In other words, on every issue he advised the seller in a manner intended to completely de-risk the transaction for the seller. This usually always results in a deal blowing up, given no buyer will assume 100% of risks in a transaction. We were able to close the transaction, but it was a grueling and adversarial process for all involved.

GROW and SELL Advisors, wholly-owned by Traversi & Co., LLC, is a premier sell-side M&A advisory firm – a boutique investment bank – serving the lower middle market.  Visit us here.

For a short video clip on this topic, click here.