Attorneys are a crucial part of selling your CPA firm. But their helpfulness can vary over a wide spectrum, from creating countless roadblocks and obstacles to smoothly facilitating a transaction. A skilled M&A attorney is indispensable in putting together the contracts and agreements in a way that protects the interests of both the buyer and the seller.
Role of the Attorney
When a buyer wants to make an offer to buy a CPA practice, he presents the seller with a letter of intent (LOI). The LOI typically serves as a non-binding broad outline of the terms of the deal. The offer contained in most LOI’s will be contingent upon due diligence, financing approval and closing, and a final definitive agreement between the buyer and seller.
If the seller wishes to proceed in the direction of a particular buyer’s offer, the terms of the buyer’s LOI are further negotiated between the buyer and seller (or the business broker in Accounting Broker’s case). At this point, an overall agreement is reached regarding the major deal points of purchase price, payment terms, seller involvement and compensation after the sale, etc. The LOI is finalized to reflect the non-binding agreement and is signed by both parties.
Many buyers and sellers invoke the assistance of their attorneys in drafting and reviewing the LOI. Many don’t. However, the point in time when attorneys should always be utilized is when the final agreement and purchase documents are put together. The final documents (not the LOI) will control the closing of the sale and what happens after the closing.
A buyer or seller should seek the advice of an attorney whenever they feel it is needed. We have seen many cases when attorneys are asked to review a letter of intent and they attempt to broaden the document well beyond its intended purpose of being an outline of the deal and terms. We have seen many other cases where attorneys attempt to go beyond their roles as legal advisors and try to renegotiate business terms already agreed to between buyer and seller. The net result of attorney overreach is higher legal fees, and in some cases killing deals.
The Right Motives
A person selling a CPA practice must carefully evaluate if their long-time lawyer is really the right person to represent them in the sale of their practice. We have seen instances where the seller’s attorney seems to be doing everything in their power to create roadblocks and derail a deal. One must carefully assess if the attorney is more interested in killing the deal to retain a client for another year, than in actually helping his client facilitate the sale of the practice.
The Right Experience
It is much more important to work with an attorney who has significant experience in preparing documents for business sale transactions than an attorney who specializes in collections or adversarial litigation.
The attorney you have used for many years may have helped you write collection letters, do real estate deals, or write simple contracts. However, he or she may not have in-depth experience in merger and acquisition work. This is a specialized area, and you need legal help from someone with strong M&A legal skills. In addition, many attorneys are trained to be combative and adversarial. They can get caught up in petty games of “tit for tat” rather than looking at the big picture of putting your best deal together. Too often, adversarial attorneys tear apart deals with their tactics.
What you need to bring a sale of a CPA practice to successful closure is a business-minded attorney with strong transactional M&A experience . . . not an adversarial litigator. Fortunately for our sellers. . . if an attorney clearly has the wrong approach, the CPAs at Accounting Broker Acquisition Group are adept at being the referee between the attorneys to bring a deal to closure.
While attorneys can slow down the process, they can also be a big help. What if a buyer demands (without the assistance of an attorney) a non-compete agreement for a 1,500 mile radius and 10 years in duration? An attorney would likely advise the buyer that a non-compete agreement must stipulate limited geography and a shorter time-frame in order to be enforceable. A good attorney would modify such unrealistic provisions before the buyer got a chance to waste the seller’s time with an unreasonable and unenforceable demand.
Accounting Broker Works behind the Scenes
Accounting Broker Acquisition Group helps facilitate deals by serving as an intermediary between the various parties, including the buyer, the seller, the attorneys and the lender. As mentioned above, we often act as referees between opposing attorneys. We negotiate extensively with the buyer on behalf of the seller . . . especially when the buyer’s attorney has made an unreasonable demand. We help the parties work out reasonable requests that then get communicated to the attorneys. Many times we have successfully worked through many attorney induced “deal breaking issues” in this way.
In fact, we have been told by attorneys in the past that without our involvement some deals would never have gotten done.
At Accounting Broker Acquisition Group, we can help you every step of the way as you sell your CPA practice. Accounting Broker Acquisition Group is the only national business brokerage of its type comprised 100-percent of brokers who are CPAs with significant “Big Four” merger and acquisition experience. Contact us today to discover the Accounting Broker difference.