Who Else Wants Wants First Hand Information On Mistakes Made By Legalman?
What I wish I had known then. If you were someone who had recently gone through the process of selling a business, how would you react to that statement? I decided to find out. I asked for previous owners who had sold their businesses to tell me.
Let me set the stage. The business was one that sold in the high seven figures. The former owner, Mr. Jim Plouffe had started it himself, and had worked hard to grow it. But it became time to move on to something else, or to nothing else. The business was sold to a public company.
Mr. Plouffe’s reaction to this hopefully provocative statement was one word. Legalman. For those readers not familiar with the expression it comes from the Robert Ringer classic book, Winning Through Intimidation. This is the term Ringer uses to refer to lawyers. If you haven’t read the book, it makes interesting, and instructive reading. It is also an easy book to read.
After we agreed that we had both enjoyed this book, Mr. Plouffe went on to expand on how he had arrived at his position. On the role that Legalman had played in the sale of his business, and in the related difficulties. I was only a little surprised with what he said. I was already half expecting him to expound on the ongoing roadblocks the buyer’s lawyer had continued to erect.
Here Mr. Plouffe did surprise me. He played no favorites when it came to the shortcomings of Legalman. And the shortcomings were largely the same for both the buyer’s lawyer and his own. Fortunately for him, his expectations were not very high, so he was careful to read everything prepared by the lawyers. And reread to make sure he hadn’t made a mistake, if there was something he didn’t understand or thought was missing. He then took appropriate action to ensure appropriate revision, based on his understanding of what was intended.
Mr. Plouffe hadn’t relied on his own lawyer to assist in the negotiations. He didn’t seem to feel that either of the lawyers was trying at a conscious or subconscious level to sabotage the deal that he had negotiated. His observation was that both of the lawyers were guilty of either inattention or the inability to listen. He also observed that both were careless.
His story as he described all this was fascinating. His business was sold to a publicly traded company. All of the purchase price was to be paid in shares in the public company. So far, so good. An agreement reflecting this was prepared. Mr. Plouffe signed it and forwarded it to the buyer for execution, and in preparation for closing. Then the fun began.
The representative of the buyer observed that their own lawyer had neglected to include an item in the seller’s representations and warranties that was critical to them.
If you are preparing to sell your business and you don’t know anything about representations and warranties, you need to learn. The buyer wanted this item to be included in the agreement. It had to do with damages to the seller arising from any misstatement of liabilities on the financial statements. Because the books had always been meticulously maintained, this was not something that greatly concerned the seller.
However, Mr. Plouffe didn’t want to give up a negotiating point without something in exchange. He had learned a few things about negotiation over the years. So he got the buyer to agree that if in one year, the share price of their stock traded for less than the price it was when the agreement was signed, the seller was entitled to exchange the shares that he received for cash value at the price at signing. A very prudent addition to the agreement, from his perspective. He instructed his own lawyer accordingly.
Legalman strikes again. The seller’s lawyer neglected to include the relevant clause in the agreement. And the buyer’s lawyer neglected to review the document to make sure the addition had been made.
Fortunately Mr. Plouffe had developed a habit of carefully reviewing every document awaiting his signature, just before signing it. He caught this potentially critical omission before signing, and was able to have it corrected. And that part of the story had a happy ending.
After commiserating about the various ways in which Legalman can gum up the works, we moved on to discuss how he had found this particular member of the legal profession. And that evolved into a more broadly based discussion on a generic approach for selecting various types of advisors.
Unfortunately we were unable to arrive at what could be considered a completely fool proof method. The best we could arrive at involved doing very careful background checks, to confirm that previous clients with similar advisory needs were happy with the assistance provided.
However this should not be used as a substitute for reading every document thoroughly and understanding it before signing. Even the best can make a mistake, although they are certainly not as likely to make a costly on as someone of mediocre ability. I always find it useful to be reminded that someone came last in his class, even graduating from the Harvard Law School. Maybe this describes your very own Legalman.
Remember the words of the late President Reagan. Trust But Verify. Although used in a different context he showed the importance of using good common sense in virtually everything in life.
Mr. Plouffe has gone on to other things since selling his business. One of his activities is advising business owners in various areas. To learn more about this activity please visit
and you may find that he can be helpful to you.
If this information has caused you to think about how you will set about selling your business, you might wish to claim you copy of the the
and review it. It will provide you with some preliminary ideas on how to prepare to sell your business.
You may choose to return from
for further browsing.