The Involved Activist Attorney
When entrepreneurs are in the planning stage of a new venture, that is the time when I want to take a holistic approach and be apprised of key parts of the business plan to evaluate and assess the prospects for a smooth start up and long-term business success. If allowed, I get beyond the broad vision and into the gritty details.
An acquaintance introduced me to the proposed new owner of a business in the competitive staffing industry. The plan was for the owner to purchase an existing staffing company from a colleague with whom he had been employed for many years.
In analyzing a signed letter of intent, one that I had not seen previously, it looked like a very positive situation.
- The financials indicated the business was established, well run and quite profitable
- The new owner had lots of hands-on experience in the industry
- There was high demand for employees in all categories with prospects looking good for the future
- At first blush, the price and an involved plan to finance the acquisition looked compelling.
As we were working out the details and I got into drafting a comprehensive purchase and sale agreement, I took a second and much more detailed look at the equity and different secured and unsecured loan portions of the complex financing plan. I then realized a key component had inadvertently been overlooked.
I advised my client that the deal, as contemplated, did not work from a financial perspective. This was accepted by all parties and a potential disaster was avoided.
When you are considering buying a business, make sure your attorney is an involved activist – one that takes a vested interest in many aspects of the transaction.