The following article was written by Equitable Law's principal (Mr. Dan Johnson) for Evolution Capital and published in its February 2015 email newsletter - 'The Evolutionist'
http://www.evolutioncapital.com/news-articles/selecting-your-legal-advisor-when-selling-your-business#.VNDnpS5sSox
Legal
Article – ‘The Evolutionist’
”SELECTING YOUR LEGAL ADVISOR WHEN SELLING
YOUR BUSINESS”
The Thoughts Of A Poacher Turned (Occasional)
Gamekeeper
Dan Johnson – Legal Advisor – Evolution
Capital
So a
decision has been made that you wish to sell your business, and discussions
have commenced regarding the process. At
some point you will need to think about what will be necessary in terms of
legal advice and assistance.
The
following reflects my musings (as a lawyer active in this area of business, for
in excess of twenty years) as to how I would recommend you approach the
process.
Number One – Don't Leave The Selection Of
Your Lawyer Until The Last Minute
There
is a natural tendency to consider that lawyers are expensive, and the longer
you can put off involving them, the cheaper it will be. You have to balance that approach with
ensuring that you don't disadvantage yourself by placing the lawyer you
belatedly instruct in a rushed position, and with limited background information.
After
all, military chiefs rarely raise their fighting forces the day before their battles
– and if they did, they should hardly be surprised if those forces performed in
an unsatisfactory manner.
The
huge advantage which Evolution Capital has brought to the market is that (as a closely
integrated part of its services), it offers a highly relevant legal advice and
assistance service to its clients from the start of the process, operating in close
liaison with the rest of its services. These services need not be hugely time
consuming - nor expensive, but it allows for early legal input designed to
ensure that your proposed transaction proceeds in a smooth manner, which stands
the best chance of success.
The
last position in which you wish to find yourself is to have progressed through agreeing
outline heads of terms, to then belatedly present them to your chosen lawyer
who recognises that there are potential significant legal issues with the deal
being proposed, or finds that you have agreed in principle to a significant
weakening of your legal position (often without fully realising what it is that
you have conceded).
Number Two – Don't Buy Solely On Price
Despite
what many may believe, the legal market in the United Kingdom is extremely
competitive, and by bargaining hard with multiple service providers you may
well be able to get a very competitive fee estimate for the legal advice and
assistance which is likely to be involved in selling your business.
However,
what you should seek to avoid is experiencing the position which seems to have
arisen in the U.K.'s property conveyancing market, where clients tend to buy
their conveyancing services based largely upon the lowest price which they are
able to obtain from enquiring of a range of legal services providers. The highly competitive nature of that market
leads to the widely perceived dissatisfaction with the legal process involved
in conveyancing, as many lawyers simply do not have the time to adequately deal
with the necessary work - for the fees they have agreed. Conveyancing customers should not be
surprised if having payed budget prices they get a budget service – and the
same may well apply to you if you also take that approach.
Remember
that when you come to sell your business, you are likely to be dealing with a
significant proportion of your wealth, pursuant to an agreement which is likely
to oblige you to face the risk of potentially repaying some, or the entire
purchase price to the buyer after the transaction. Surely, that makes it worth focussing upon instructing
someone who can really help with the process in a highly competent fashion
(without price being paramount).
However,
you should clearly ascertain how much a process might cost, and you should aim to
mitigate costs for an abortive transaction – but a fair price for good quality
work should be your aim. Evolution
Capital aims for its integrated legal services to be competitive and clearly
priced (while providing full quality).
Number Three – Don't Necessarily Choose Your Habitual
Advisor
Lawyers
and how they practice law is similar to how doctors practice medicine, in that
while all doctors have a common training on the core elements which underlies
their profession, relatively soon into their professional life, they tend to focus
upon areas of medicine in which they have started to gather experience (and
hopefully expertise).
In
exactly the same way that you would not expect to receive expert advice upon a
heart problem from a cancer specialist, going to a legal adviser who has recently
helped you with (say) an employment law claim against your business (however
adequately) – is not necessarily going to be appropriate in terms of obtaining assistance
with the legal aspects of the sale of your business.
I know
that certain of my colleagues have views as to the frustrations of dealing with
lawyers selected to undertake a business sale, when the business owner has
selected them by virtue of the fact that those lawyers have advised the business
owner in relation to all his personal asset and family matters over many years
(or they know them from the golf club etc.).
I will
choose to say nothing more, other than to say – do choose a lawyer with the
necessary experience and expertise in what is involved in a business sale
process – It’s in your best interests!
Evolution
Capital would be delighted to assist by offering its relevant integrated legal
services.
Number Four - Don't Blindly Choose A ‘Top’ Firm
Every
commercial centre in the U.K. has a list of ‘top’ firms in their locale. However, when you review that list, what you
are considering are the largest firms, or (viewed from another perspective), the
firms which have been the most successful in extracting more fees from more
clients.
Despite
all their marketing efforts to persuade you as to their merits, large firms do
not necessarily provide a great legal service to all of their clients across
all aspects of legal advice – and they are certainly not likely to be
considered inexpensive.
If you
want an analogy, some of you may have experience of having a luxury car brand model
serviced. That experience may be of it
being extremely costly, with the nagging reflection that you’ve just paid a
large sum for a lot of relatively inexperienced (but well paid) people, to blindly
follow a computer–diagnostic machine’s advice.
Conversely, you may have discovered much more satisfaction from economic
servicing from an experienced mechanic who really understands what is likely to
be the issue with the car (as explained to him).
‘Top’ firms
know the market and their business very well, from persuasive marketing through
to ensuring work is done by relatively inexperienced staff at relatively high
fee rates! While it might be cynical to
say that ‘the marble and the mahogany’ is for the benefit of the lawyers, if it
is your money that is being spent - think hard about whether you feel you are going
to receive a great service at an economic price from such service providers.
You may
have a deep psychological need to consider yourself a client of a ‘top’ firm
(I’ve seen it recently), but we can recommend appropriate professionals for you
if that is the case!
Evolution
Capital aims to be able to provide you with ‘top’ legal advice, but without the
‘top’ firm costings.
Number Five – Do Choose A Personal Recommendation
If at
all possible, I would strongly encourage you to seek a personal recommendation (from
a person you trust) as to an appropriate person to provide the necessary legal services
for you.
My view
is that legal services are and should be chosen by reference to the individuals
likely to be involved – both in the transaction itself, and who are going to be
available afterwards.
I am
always surprised to find myself talking to contacts who say that they have
recently been dealing with such-and-such a firm - but when I ask who they have
been dealing with, they are unable to provide me a name! I often question whether they have been
delegated to such a junior lawyer, that they are embarrassed to tell me – but
the reality is that the process has become so impersonal – that the contact did
not care which individual was undertaking their work! I am generally (in such situations) advising
clients as to what it is they have agreed to – which is a position I would
encourage you to avoid!
Several
years ago a businessman said to me that over the course of their career, they had
been obliged to use various legal services providers, some of whom were
boutique firms - who had but a small cadre of individuals involved, and some of
whom were large firms - with many times that number of personnel. It was that businessman’s perception that
within the respective numbers of personnel in each business, there were about
the same proportion of individuals who that businessman would welcome working
with again (because they were good at what they did and the businessman liked working
with them etc.) - and those who failed that test on one or more grounds. However, the businessman remarked - within
the smaller business he tended to know the identities of the individuals who
fell into each respective class. In the
larger business, it was more of a ‘lucky dip’ (even for those inside the larger
business)!
Evolution
Capital's huge advantage is that it already offers a personal recommendation
for legal advice ‘in house’, based upon its prior experience of working with its
chosen lawyers.
Conclusion
I hope
the above has assisted you think about some aspects of how you might select
your legal adviser for your future transactions.
I would
be delighted to continue any conversations with regard to my thoughts on these
issues.
In my
next article, I intend to muse upon some of the alternative approaches to
undertaking a legal transaction that would involve a potential sale of your business.
Monday, 20th October 2014
Legal Advisor
U.K. Cellular Tel. +44 (0) 7788 537 187
The Private Office | 24 Bemish Road | London | SW15 1DG
e-Tel. +1 (646) 470 1880 | e-Fax. +44 (0) 871 264 9515
