After spending thousands of dollars and countless hours of time working on a major business acquisition or real estate sale, the deal is dead.
How could this happen after you spent so much thought and time planning out your course of action? You employed accountants, attorneys, brokers and other professionals to help you put the deal together and protect your company’s interests. Yet, after many months of planning, due diligence, negotiation and circulation of several drafts of the proposed definitive contract, you find out that your deal is dead and ready to be buried. What could you have done to prevent this?
Control Issues – Defining and negotiating who will have control after a merger or acquisition can be the greatest stumbling blocks in completing a transaction. In many transactions, the deal is not simply about the money. Rather it may be about control.
When a small, entrepreneurial business is acquired by a bigger business, the small business may not be driven strictly by “the bottom line.” Since small business owners don’t always have to justify the bottom line to shareholders, they are used to having more control when making decisions. In most business transactions where control is involved, it is important to create that proverbial “win-win” situation. Both parties have to be flexible and willing to compromise.
Risk Issues – Every business has inherent risks that may create a certain degree of exposure for a company. As a result, when negotiating the acquisition or disposition of a business, it is important to identify these risks early in the negotiations. Some common risks include:
- Environmental matters
- Pending litigation
- Inventory issues (too much or too little)
- Accounts receivable
- Title matters
- Liens
- Indemnities
- Representations
- Warranties
Tax Issues – Among the most significant financial ramifications of a transaction are the tax consequences to both the buyer and the seller. These issues may in fact be more cumbersome to resolve than determining the price of the asset being sold. While a business or real estate owner may be motivated to sell its assets, it may require flexible terms to avoid significant tax liabilities and penalties.
Tax issues or consequences that can impact a transaction include:
- Capital gain to the seller
- Tax treatment by buyer
- Deferral of capital gain
- Allocation of purchase price
- Non-compete agreements
- Employment agreements
- Stock options
- Tax liabilities of the seller
Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.
If our law firm can be of assistance, please call 855-537-0500 or visit www.ksnlaw.com.
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