Guest Blog: Legally Speaking

How to maximize the value of your business when selling – Part 2

Editor’s Note: This blog is the second in a two-part series about legal issues that can impact the sales price of your business.

By Carrington, Coleman, Sloman & Blumenthal, LLP

Our first blog in the series addressed starting with the end in mind, understanding options, assessing business and personal goals, minimizing tax obligations, and getting everything ready for the final purchase agreement.

In this second part, we’ll look at a few more things you may want to do:

Let third-party advisors help you. While business owners want to ensure corporate formalities are observed, minutes are kept and contracts are executed, sometimes the daily concerns of running a business rank above legal formalities. Consulting with an attorney or investment banker prior to commencing the due diligence process can help you identify and address issues and oversights that, if left unchecked, can result in an unrecoverable reduction in purchase price.

Even worse, a bad first impression can create an atmosphere of distrust and potentially dissuade the buyer from moving forward with the transaction. There will inevitably be unexpected issues that arise, and your attorney’s creativity and problem-solving skills, along with your investment bank’s advice, will be critical in resolving these issues and advancing the sale.

Although the majority of due diligence is buyer-driven, the due diligence period also allows the seller to do some of his or her own due diligence, to make sure the purchaser has the right management experience and expertise needed to run the business and the financial wherewithal to satisfy any post-closing payment obligations. You want to make sure the deal on the table is the right deal. Business owners should assess whether the buyer’s business model complements their own. Does the prospective buyer have a reputation for cutting costs and flipping companies or a history of post-closing lawsuits? Are there any other red flags making litigation likely?

Avoid landmines. The results of due diligence often determine the terms of the purchase agreement, including the purchase price, the scope of the seller’s representations and warranties, the seller’s indemnification obligations, and the parties’ post-closing covenants. This is a highly technical document. Details matter. The purchase agreement establishes the rules of the game and will be referred to in perpetuity to address any and all issues that may arise between the buyer and seller. A well-documented purchase agreement can lead the way toward a smooth closing and minimize post-closing disputes.

The “sticker price” of a deal, cash at closing, is only one element of a purchase price. Often agreements include complex post-closing purchase price adjustments and earn-out provisions. These can go awry unless dispute resolution mechanisms are documented precisely. A savvy M&A attorney will create an agreement that gives the seller the economics of the deal that he or she deserves, without unduly restricting the buyer.

Preserve your legacy. For many entrepreneurs, their business represents their life’s work. Turning over the keys is emotional, and there’s often much more at stake than the payout. Owners want to ensure their employees are compensated fairly, that the company’s contracts with longstanding vendors and customers are honored and that the founder’s principles and business standards are upheld. While many buyers will offer to operate the company in the founder’s footsteps, their oral assurances are rarely incorporated into the purchase agreement. If the obligations are not in writing, there’s no assurance the buyer will honor a verbal commitment and the seller will be left without recourse. Ensuring that these promises are accurately memorialized can be crucial to preserving your legacy.

Like building your business, selling it will require creativity, agility, endurance and a skilled team of outside advisors. With the right team and the right transaction, you will close the deal and have much to celebrate.


Bret A. Madole is a partner in the Dallas office of Carrington Coleman and chairs the corporate, mergers and acquisitions, corporate finance and banking practice groups at Carrington Coleman. He can be reached at 214.855.3034 or This blog does not contain legal advice, nor does it create an attorney-client relationship.