5 Legal Mistakes Selling My Company

I’ve sold one company. It was an incredible experience with many lessons to share. One of them is under the realm of attorneys.

A good law firm is necessary to get an acquisition done, but managing it well will save you tens to hundreds of thousands of dollars.

Here’s what I learned to help you not make the same mistakes:

Get a Quote

When interviewing law firms, ask for a quote. Get it broken down into sections.

They’ll ho-hum but if they can’t provide a quote, move on to another firm.

Use this quote as an outline to stick to going through due diligence.

Characteristics of a Good Law Firm

• Find a legal firm that’s done many deals of similar size to yours. For example, if the law firm you’re interviewing does $500m M&A deals, and your acquisition will be $50m, not a good fit.

• A law firm you talk to and they’ll explain you details.

• One that provides a thought-through outline of their process.

• A partner who is less emotional and can help make decisions.

• Not too cheap, but not too expensive, you’ll find the middle ground when interviewing 5+ firms.

Lawyers Are Important, Sorta

The acquirer will most likely have a strong law firm ready to take advantage at every corner.

Why are they “sorta” important? Because it’s important you run the show still. They’re under you and to manage spend, you’ll have to manage their time wisely.

What is important to spend time on and what are they wasting time on hypothesizing scenarios.

Not Managing Lawyers

This brings me to my next point.

Your legal team will have 15-20yrs+ experience, have seen it all, and can talk the talk.

Do not be fooled and leave them to manage on their own. Their #1 goal is to generate revenue off you from billing hourly, while their #2 goal is to help you with your acquisition.

A few tips to help reduce legal spend:

• Make sure when issues arise, you think thoughtfully about, “Is this really an issue and/or happens often?” If not, move on. Lawyers love to theorize about worst-case scenarios.

• Don’t let more than 1 partner on a call.

• Prefer email over calls. If necessary, schedule 15min and move quickly.

As tiring as due diligence is, manage the attorneys closely.

Closely Review Your Non-compete

Don’t let a long due diligence process overtake your flexibility after the exit.

You built a great company and know your industry well. You have a natural advantage there.

If you want to advise a company, invest, be on a board, or start something new in the same space, you want flexibility.

“It’s Market”

Red flag when you hear this term. “Industry standard” is another.

Everything is negotiable but pick your battles. Which terms are you a hard no on, and which will you bend.