This quote is from Shakespeare’s Henry VI. However, it’s not what most people think. The idea was that by killing the lawyers, there wouldn’t be anyone in place stop a contemplated revolution or to maintain and restore order. The same is true for business deals.
Lawyers have a role – it’s to maintain order, by which I mean, to insure the deal documents and conditions are done in an orderly and legal manner.
That’s it – that’s all.
Get two things straight: One, you need a lawyer and two, lawyers are not negotiators. They are scribes.
Their role is STRICTLY to reduce to writing what the parties have agreed to and, to do so in an orderly manner that is legally binding. Of course, you want them to do so in a way that best represents your interests.
Far too many business buyers make catastrophic mistakes with lawyers. On the one hand, many never hire one at all and rely on one lawyer to represent the deal and handle contracts for both parties, or they merely engage a closing agent. This is a massive mistake. Others take it to the other extreme and allow their attorney to become overly involved in the deal.
Hiring an attorney from a fancy big law firm doesn’t mean they are better. Similarly, using a sole practicing attorney just because their rates are cheap may not be prudent either.
Remember, all lawyers are not created equal. They have their specialties.
Your brother-in-law’s second cousin the patent attorney isn’t the guy to hire to do a business sale transaction. The attorney you ultimately engage should have experience with deals of the size you are undertaking and wherever possible, have familiarity with the industry of the business you’re buying.
If by chance you’re purchasing a franchise you absolutely must hire an attorney who specializes in franchise law.
Lawyers serve a role to explain to you the potential legal exposure you may be undertaking in respect to certain deal points.
As an example, what are your options in the event the seller breaches the non-compete clause or, what protections are in place in the event you discover past fraudulent activities in the business or misrepresentations of the seller?
I know some incredibly competent attorneys and ones who undoubtedly focus upon getting deals done however, far too many are deal-breakers; not deal-makers and there are way too many who should find another profession. In my experience, too many attorneys try to show everyone involved in the deal how smart they are (most are not too smart by the way). A colleague of mine always says that “99% of the lawyers give the rest of them a bad name.”
Here’s the key: deals get done between buyers and sellers; not between their legal representatives. Work through the deal points with the seller, and aim to resolve any differences directly with them. Listen to what your attorney has to say, but make your own decisions. Provide your attorney with a detailed list of everything you and the seller have agreed to and let them put it into legalese with the additional clauses and conditions needed to protect you. Do not let them “over-lawyer” the agreement. Quite often, the standard broker purchase and sale agreement will suffice with additional conditions added to reflect the unique aspects of your deal.
(In the “Negotiating the Deal” section of the guide How To Buy A Good Business At A Great Price – there’s a complete section called “getting down to details” that clearly explains in plain English every point in a purchase agreement and the best strategy to implement. It’s critical that every business buyer knows these deal points).
If you don’t have any experience in buying a business, you may need to rely on the lawyer a bit more, however, you are far better off engaging an advisor who has direct experience buying businesses to assist you, as that is their specialty. I don’t mean a neutral business broker, you want someone looking out solely for you who has a wealth of experience in business sales.
So keep in mind that you need an attorney. Hire one who has experience in similar deal sizes and preferably in the business type you’re buying.