Mergers & Acquisitions

Resources: Interviews with Industry Experts

Our goal at Morgan & Westfield is to provide you, our readers, with high quality information and valuable resources to help you navigate through the process of buying or selling your business. In this section, we provide interviews from various professionals somehow involved in the process of buying or selling a business.

Rohrbachers Cron Manahan Trimble & Zimmerman Co. L.P.A, Attorneys

Nicholas J. Cron, Russell R. Miller, and Matthew R. Persinger

In this very special interview, we have three attorneys from the firm Rohrbachers Cron, located in Ohio. These three attorneys, Nicholas J. Cron, Russell R. Miller, and Mathew R. Persinger, have a combined total of over 60 years of legal experience. We are honored to have this unique opportunity. Today, the attorneys will discuss the role attorneys play in helping you sell your business. They also address questions you may have about your selling your business.


Key Points from Our Conversation

  • “Therefore, it is my opinion that what an attorney adds to a business transaction other than strict legal advice is perspective as to what are reasonable expectations from the other side, as well as from their side of the transaction.”
  • “The attorney is integral in all of those phases of the transaction. Having an attorney will ensure a complete and clean sale of his business and will help avoid unanticipated issues and possible claims.”
  • “It is, therefore, important for the purchaser in the due diligence portion of the process to reach out to customers and secure their commitment to continue with the business upon the transfer.”
  • “It is important to consider the timing for advising current customers that a possible sale of the business is being considered, and the assistance of the seller is important in this decision and process.”

Interview

Tina: I am considering selling my business. What does an attorney provide business owners like me, besides legal advice?

Rohrbachers Cron: The sale of a business can be a stressful time both for the seller and the buyer. It is something probably only engaged in by most business owners either once or twice during their business career. Besides legal advice, an attorney can provide a business owner or buyer with perspective as to reasonable and unreasonable terms, the requirements and expectations that can be expected from the other side, insights and guidance relating to the transaction from similar, prior transactions, and problem solving options for situations which may arise during negations and closing . This is especially important when either the seller or buyer is a large or sophisticated company that has experienced the purchase and sale of businesses on a regular basis . Therefore, it is my opinion that what an attorney adds to a business transaction other than strict legal advice is perspective as to what are reasonable expectations from the other side, as well as from their side of the transaction.

Tina: I own a small business and I think I am ready to sell my business. At what point do I hire an attorney and what parts of the selling process do they handle?

Rohrbachers Cron: It is our recommendation that you consult an attorney early on in the process. In the beginning, the attorney’s time may not be significant as business terms, valuations, and other matters are determined. However, it is our recommendation that an attorney be advised when the business owner is considering the sale of his or her company so that he or she can be advised concerning what to expect in the process. Further, an attorney can place the business owner in contact with other professionals who should be involved, such as appraisers and accountants, if the business owner does not already have those professionals engaged.

The attorney’s primary involvement begins when the seller has identified a potential purchaser with whom he wishes to make the first step towards the sale of the business. This period usually entails a time for review or preparation of a letter of intent, followed by the preparation of a purchase agreement , and the provision of due diligence and closing of the transaction. The attorney is integral in all of those phases of the transaction. Having an attorney will ensure a complete and clean sale of his business and will help avoid unanticipated issues and possible claims, such as those for breach of warranty or failure to disclose, down the road after the business has been sold.

… it is my opinion that what an attorney adds to a business transaction other than strict legal advice is perspective as to what are reasonable expectations from the other side, as well as from their side of the transaction.

Tina: I am selling my business and I just hired a CPA and a Business Appraiser. Do I still need an attorney?

Rohrbachers Cron: Each one of these professionals performs an important function in the sale of the business, but they bring a perspective which is different from that of the attorney, and they cannot perform many functions that only legal counsel may professionally provide. A CPA and Business Appraiser should not be providing legal advice concerning a sale of a business. That is the function of an attorney. In most cases, these two professions provide preliminary work prior to the entertainment or preparation of a letter of intent for the purchase or sale of a business. While the CPA and the Business Appraiser bring valuable services and insights to any transaction, those services and insights are distinctly different than those provided by legal counsel.

Tina: I own a business and lease the space I am using to operate the business. Legally, am I required to tell my landlord that I am considering selling my business?

Rohrbachers Cron: Although there is no specific requirement, legally, to notify a landlord of the potential sale of a business, your lease may contain a provision imposing that responsibility upon you in the event of a sale of the ownership interest or assets of your business, or in the event of a change of control in the entity owning the business. However, as a practical matter, most purchasers of a business that is located on a leased premise will want to know that they can assume the current lease or negotiate a new lease with the landlord. This is often a very integral part of the purchase, or sale, of a business. It would be wise to have communication with the landlord to determine if they are open to an assignment of the current lease to a perspective purchaser or to discuss terms they will consider in negotiating a new lease with a perspective purchaser. This information will be invaluable to the business owner during the process of selling his or her business.

Tina: How do I ensure that key customers stay after I buy a business? Can I address this with a contract?

Rohrbachers Cron: Part of the purchaser’s due diligence of the sale of any business is a thorough review of current customer’s contracts with the business being purchased. A thorough review should be made concerning the assignability of contracts and their enforceability after assignment. Many such contracts are freely terminable by either party, or terminable upon the sale or transfer of substantial ownership in a company. It is important to consider the timing for advising current customers that a possible sale of the business is being considered, and the assistance of the seller is important in this decision and process. It is, therefore, important for the purchaser in the due diligence portion of the process to reach out to customers and secure their commitment to continue with the business upon the transfer. This should all be part of the due diligence process prior to a purchaser making a final commitment to purchase a business. It is not usual for a seller to guarantee that customers will transfer over to the new business. It is, therefore, important that the purchaser do extensive due diligence on this issue. Having the former owner make introductions and possibly sending letters of introduction and encouragement to continue with the business are important. Negotiating an agreement with the seller, or the principal of the seller who has strong ties with the customers, for some period of time following the purchase, can be of invaluable assistance in customer retention. A non-disparaging clause as well as a substantial non-compete provision from the seller in the purchase agreement are also helpful.

Part of the purchaser’s due diligence of the sale of any business is a thorough review of current customer’s contracts with the business being purchased.

Tina: I own a small business and I have employees that have been with my company since I opened. I have a buyer that wants to buy the business but only if he can keep the employees. Can we agree to this? If he buys the business and then the employees quit, will I be liable for breach of contract?

Rohrbachers Cron: If a purchaser desires that certain employees stay with the company, it is important during the purchaser’s due diligence period that he be given access to these employees and obtain such a commitment as he should deem necessary based upon the industry involved of those employee commitments to stay with the company. Existing written employment contracts, if any, of current employees should be reviewed for provisions relating to termination upon a sale of the company, or which allow the assignment of the contracts in connection with the sale of the company, or similar provisions which impact this issue. This can take the form of employment contracts or, in businesses that do not generally work under employee contracts, through some verbal commitment on the part of the employees to remain with the company. This requirement that certain employees stay with the company are normally contingencies on the purchase and sale of the company. However, it is not normal to find a guarantee of such after closing and transfer has been made.

Tina: I am ready to sell my small business, but I do not want my employees to know about the sale because I am worried that they will leave the business. Do I have to disclose the sale to my employees? Legally, who do I have to disclose the sale to?

Rohrbachers Cron: If the purchaser is not concerned about retention of the current employees with the company, then there should be no need to involve those employees in the sale or to disclose to them that a sale is occurring. It is, however, very difficult to keep such information from current employees because of the due diligence that most purchasers require prior to the purchase of a company. If, however, the purchaser is prepared to cooperate fully in minimizing due diligence work until after-hours time-periods, this could possibly keep the information from current employees. Finally, there is no general legal requirement that the identity of the purchaser be disclosed. Many purchase agreements contain the requirement that any publication of the sale of the company be controlled so that any notification be jointly approved by both parties, and provisions addressing these issues should be negotiated as part of the purchase and sale agreement.

Tina: Do you have any other tips or advice for anyone buying, selling, or appraising a business?

Rohrbachers Cron: My advice is patience, diligence, and lack of emotional attachment concerning the business being purchased. Be willing to walk away from the deal if it is not right. The preparation for a sale is arguably just as important to, or possibly more important than, the sale or purchase of a company than the negotiation, due diligence, or closing phases of a transaction. Knowing what you can reasonably expect as to value and terms can help you greatly in setting a clear point beyond which you should not pursue any particular transaction which varies from your parameters. While appraisals are very valuable, the selection of a qualified appraiser is important. Check credentials carefully. I often vet these professionals for my clients. Any indication from the owner of a business you are considering purchasing that there are receipts that are not reflected on the tax returns for the business should be viewed with suspicion and caution. Any income that is not properly disclosed on the tax return should not be considered in the determination of the value of a company for purchase. If the company is not fully reporting their income on their tax return, it is likely they are not being honest with you as the purchaser. As the seller of the company, you should be prepared to disclose at least 3 years of your filed tax returns, as well as current profit and loss statements and balance sheets.


Nicholas J. Cron’s Bio

Nicholas J. Cron
Rohrbachers Cron Manahan Trimble & Zimmerman Co., LPA
8th Floor 405 Madison Avenue, Toledo, OH 43604-1243
(419) 248-2600
ncron@rcmtz.com

Mr. Cron has practiced exclusively in the business and estate planning areas of law for the majority of his legal career. He received his undergraduate degree from St. Joseph’s College, a J.D. from the University of Toledo, and an LLM in taxation from Wayne State University. In 1974 Mr. Cron was licensed to practice law in the State of Ohio and in 1999, in the State of Florida. Mr. Cron is admitted to practice in the Supreme Court of Ohio, the United States Supreme Court, the United States Court of Appeals for the Sixth District, the United States District Court for the Northern District of Ohio.


Russell R. Miller’s Bio

Russell R. Miller
Rohrbachers Cron Manahan Trimble & Zimmerman Co., LPA
8th Floor 405 Madison Avenue, Toledo, OH 43604-1243
(419) 248-2600
rmiller@rcmtz.com

Mr. Miller joined our firm as a shareholder in 2013. Mr. Miller’s practice includes extensive work in small-to-medium sized business representation and commercial law, including a significant representation in real-estate matters. He has represented a diverse selection of businesses and has extensive experience with the formation of for-profit and non-profit corporations, limited liability companies, and partnerships. Mr. Miller is also familiar with entity operations such as entity and governance matters, employment law, commercial law, UCC and contract drafting negotiation, and similar matters encountered on a day-to-day basis. Mr. Miller has significant experience in a wide range of real estate transactions and related loan transactions. He has also developed an estate planning and succession planning practice as a growing portion of his practice. He has experience with plans of a broad scope and documents ranging from simple wills and powers of attorney to trusts and family limited partnerships and/or limited liability companies.


Matthew R. Persinger’s Bio

Matthew R. Persinger
Rohrbachers Cron Manahan Trimble & Zimmerman Co., LPA
8th Floor 405 Madison Avenue, Toledo, OH 43604-1243
(419) 248-2600
mpersinger@rcmtz.com

Mr. Persinger joined Rohrbachers Cron Manahan Trimble & Zimmerman Co. L.P.A as an associate attorney in 2014. Mr. Persinger attended undergraduate studies at Bowling Green State University. He subsequently attended The University of Toledo College of Law, where he served as a Judicial Clerk for the Honorable Stacy L. Cook at the Lucas County Court of Common Pleas. Before joining our firm, he was an Assistant Prosecuting Attorney in Williams County, specializing in adult felonies and public sector law, and was also an associate attorney with a general practice firm. Since joining RCMTZ, Matt has concentrated his practice on insurance defense and business litigation. He was admitted to the Ohio Bar in 2013.

A Roadmap to the Successful Sale of Your Business (152 pages)

A Roadmap to the Successful Sale of Your Business (152 pages)

You could spend a lifetime figuring out how to successfully sell your business and still end up confused or clueless. What if you can stop the guesswork and start taking action now?

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