Published on 01/04/2021 by Any Business.Com.Au

Choosing a Lawyer for Business Sales & Acquisitions: Guide

Buying or selling a business is exciting. As the seller, you're eager to close the deal and move on to retirement, your next business idea, or whatever you plan to do next. As the buyer, you're keen to take the reins and push the business to greater heights.

However, like other worthwhile endeavors, business sales and acquisitions come with their own set of challenges — legal hurdles being one of them.

Deal Maker

Having the right legal team to guide you on this journey is crucial in ensuring the success of your transaction. But how do you go about finding lawyers who can make — rather than break — your deal?

Throughout our decades of experience in this industry, we've heard countless complaints from brokers, business advisors, and even solicitors about deals that have gone wrong because of the wrong lawyers. We've also noted and learned from our own experiences in mergers and acquisitions (M&A).

Through all of these, we gained a deep understanding of the things that can make or break deals. Here are the most common issues that business buyers and sellers experience with lawyers in sales and acquisitions — as well as what you should actually be looking for in your lawyers.

Inefficient Processes

The biggest known issue for most lawyers in this field is their lack of systems and processes.

Many clients reported having the misfortune of working with lawyers who don't follow any process. They simply deal with documents as they land on their desk and review them only whenever their schedule permits (instead of following the deal schedule).

They often have no set parameters for timing the deal. Many of them also reportedly waste hours on drafts, redrafts, and back and forth emails.

Top Tip:

The lawyers you'll want to work with have clearly defined processes in place. They create, use, and constantly update checklists and templates to ensure that important things are picked up, and that no time is wasted.

When you're vetting potential lawyers for your business sale or acquisition deal, ask them about how they do things and what they do to keep a deal moving. Do they use any techniques to minimise the need for drafts and redrafts? Ask if you could take a look at their checklists and templates (if any).

Poor Communication

Let's face it, lawyers in general are notorious for being poor communicators.

The thing is, legal education focuses on finding problems but does not give enough attention to cleverly finding solutions. This emphasis on problem solving often comes at the expense of effective communication.

Many clients observe that the way their lawyers communicate with other parties is aggressive rather than assertive, which results in a battleground environment. Many lawyers are also not adept in communicating with other members of your deal team, such as your brokers, advisors, accountants, and so on.

When issues arise, most lawyers prefer to keep using emails and letters instead of getting on the phone or organising a meeting. Besides causing parties to drift further apart, this practice also results in legal fees escalating quickly on all sides.

Good communication is critical in driving good deals. Good lawyers clearly and regularly communicate not just with you, the client, but also the other side of the deal and other parties involved in the transaction. They likewise acknowledge that personal interaction is the best way to arrive quickly at the best solution.

Top Tip:

When you're vetting potential lawyers for your
business sale or acquisition, ask them about their communication policy and style. Do they follow a defined communication process to keep deals on track?

How do they communicate with all parties? What do they do to keep important stakeholders in the loop... without the need to increase fees?

Asking questions like these can help you identify if communication is a strength or a weakness in your prospective lawyers.

Slow Progress

Many clients complain that their lawyers move too slowly in
a business sale and acquisition deal. This typically results in delays in doing document review, failure to respond to clients on time, and an inability to keep the deal on track.

Buyers, sellers, and advisors alike have reported being disappointed by deals that drag out for months longer than expected.

This slow progress is usually due to two things:

1. The lawyers don't fully understand what they are doing. This is probably because not all commercial lawyers are experienced in handling sale and acquisition deals.

2. The lawyers don't have the right systems and processes. Using such tools enable more efficient transactions.

Commercial lawyers who don't have extensive experience in handling business sales and acquisitions are bound to get stuck whenever they encounter issues and roadblocks.

Clients have shared that when this happens, the lawyers usually stop communicating with them and/or become uncommercial and combative. As a result, the process can drag out over many months or – worse – the deal might even fall through.

Top Tip:

It's important to set expectations with your legal team right from the onset. You need to know how many sale or acquisition deals your prospective lawyers have undertaken and — more importantly — how many of those were successful. The more information you can get, the better.

Ask them, too, about how long they expect the process to take. It would also help if you get an idea of the type of systems and processes they use (if any) in closing deals.

Lack of Experience and Knowledge

As mentioned earlier, one of the major issues that buyers and sellers make in choosing a lawyer for their transaction is assuming that all lawyers are the same.

The reality is that M&A is an extremely specialized field within commercial law. Commercial solicitors have different levels of understanding as well as experience when it comes to business sales and purchases. Most solicitors in general commercial legal practice handle only a few sale or acquisition transactions every year.

Very few lawyers have expert knowledge in handling M&A deals. These experts have gained extensive knowhow and firsthand experience that enable them to deeply understand the actual risks (as opposed to perceived risks) and the best ways to close a successful deal in the quickest time and with the best outcomes possible.

Top Tip:

It's important to verify your prospective lawyers' expertise in M&A before bringing them into the transaction. Without specialised knowledge and actual experience in this field, you can expect problems to arise and the transaction to take a much longer time than you had hoped.

Ask your prospective legal team about successful deals that they took part in. Also, find out how many M&A deals they've successfully handled recently (e.g., in the past 12 months).

Uncommercial Approach

Another common complaint that we hear is that most lawyers focus only on the legal side of a deal. They highlight risks without thinking through how likely those risks are to ever occur, or how much it would impact the parties if they were to occur. They focus only on looking for legal solutions rather than examining each element in a broader context.

The result of this approach is that many of them can't see the wood for the trees. This can cause the deal to fall through, or their client to make unnecessary concessions.

Top Tip:

When it comes to M&A deals, it is best to work with lawyers who take into account not just the law but also the commercial side of the deal.

Good lawyers can distinguish small (or even insignificant) risks from large ones. They know how to identify critical issues and disregard red herrings. They help clients understand which battles to pick and which to ignore.

Good lawyers have a good track record not just in complying with laws but also with getting the best deals for their clients. They are competent in mitigating risks not just in the legal but also the commercial side of
the deal.

Wrong Focus

Last but not the least and also related to the previous point is the observation of clients that most lawyers focus on scoring points rather than making deals. Many lawyers are seen as aggressive; unfortunately, this rarely achieves anything besides wasting time and money. Using an aggressive approach often results in unproductive negotiations, with parties moving further apart due to the ensuing distrust.

M&A is one of the unique areas in law where both parties in the transaction want to reach the same outcome. Perhaps because of this, M&A requires a different set of skills compared to most other areas of law.

Good lawyers exhibit a balance of both legal skills and "soft skills". They possess not just IQ but also EQ... and actively use both in negotiating and closing deals.

You'll want to choose a lawyer that is driven not just to "win" but also wants to get the best deal for all parties whenever possible. They should be able to negotiate cleverly, instead of stubbornly arguing or even stonewalling.

Top Tip:

Don't just look for lawyers with knowledge and experience in M&A. Consider, too, if they have the right attitude because this can spell the difference between how quickly and drama-free you can conclude your business sale or acquisition deal.

In fact, this alone may determine whether you reach a good outcome at all.

Putting It All Together

To sum it all up, when selling or acquiring a business, you need lawyers who have specialised knowledge in M&A, extensive experience in handling business sale and acquisition roadblocks, and the right attitude to make the deal a success in the shortest amount of time.

You'll want lawyers who prioritise getting the best deal rather than 'winning' — and know how to cooperate and negotiate to get the best outcomes. They should also possess excellent communication skills and follow defined systems and processes.

When choosing among prospective M&A lawyers, refer to this guide and ask detailed questions to help you understand if they're the right fit for your needs. To help you out, we've created a checklist of the types of questions to ask.

This guide was put together by Aspect Legal Managing Director, Joanna Oakey. Joanna has close to 2 decades of experience in commercial law, working with a large and diverse portfolio of organisations in the areas of mergers and acquisitions, contract law, procurement and branding. If you need some guidance with any of the above Contact Aspect Legal here.

AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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