Tips/pitfalls for choosing a legal representative for the sales process
The legal process we go through when deciding to buy a business is not the most glamorous aspect of negotiating the sale, but is the most critical aspect to get right. A poorly managed legal transfer can cost huge amounts of money and time to put right, and in the worst cases the legal bills can cause even the best businesses to fold. One of the first steps in the whole process of selling or buying a business should be to get legal representation, but how do you go about choosing the best legal representative?
Business Sector
Just like many other professions, lawyers generally specialise in a certain area of the law. Larger practices will have departments for criminal, civil, property or family law with dozens of professionals working in each section, but a smaller, local firm may only be experienced in handling very routine legal matters or deal with the sale and purchase of residential properties only. The legal firm which a business uses routinely for sending out letter to clients or for legal advice on contracts may not be the best choice to help with a complex purchase or sale of a business. The type of business being sold or bought may also affect the choice of lawyer. A more general lawyer may be able to handle the straightforward purchase of an accountancy practice managed through a broker, whereas a more specialist firm will be needed to manage the acquisition of a larger business which is spread over several sites and has property assets which are being sold along with the business.
Recommendation
If the current legal representation is not suitable to deal with the sale, then another company will have to be found. The legal profession is well used to these circumstances and will often have good working relationships with several law firms in the immediate area which specialise in different areas of the law. A business’s own lawyer is therefore the best place to ask for a recommendation for the specific skills required in concluding the deal. If a broker is being used to facilitate the sales process, they are another ideal source of recommendations. Brokers will be dealing with lawyers on a daily basis and will know which firms are professional and efficient, and which are to be avoided. They will also be able to recommend a firm which is specialist in the area where the business is located or in their niche of the market. Finally, if all else fails, personal recommendation from other business buyers or purchasers about what lawyer to use can be very helpful also.
Location
In days gone by, it was essential to have a local legal firm as everything had to be done face to face. Nowadays, with the advent of technology such as email and fax, this is less critical. Many people complete a business sale or purchase without ever meeting their legal representative in person, with documents being posted out for signing and information communicated by phone or email. With a straightforward purchase, there is no harm in doing business in this manner and it certainly saves large amounts of time for both parties. However, where negotiations are complex or legally difficult, it can be better to have a lawyer close to hand to be able to visit and advise on matters as they arise. Some buyers feel more confident taking their legal representative to meetings with them as negotiations are progressing. A further complicating factor is that legal systems are different in Scotland and England, and if the purchase or sale involves cross-border negotiations then the correct legal representative needs to be selected.
Personality
Nobody expects to form a lasting friendship with their legal representative, but it is important to find someone with a pleasant personality that clients feel they can get along with. A clash in personality and style can mean that the process is longer and more drawn out than it needs to be. Meeting with a legal representative in person can give a good indication of whether personalities are compatible, and whether the relationship will be professional and efficient.
Attitude to the Case
A good legal representative is one who is interested and enthusiastic about representing your interests, whether as a buyer or a seller. A lawyer who appears disinterested in the individual or their business is not likely to put much effort into pushing through their deal and negotiating the best terms possible for them. Conversely, a lawyer who is overly enthusiastic and too pushy may appear desperate for the business, which often sets alarm bells ringing with potential clients. Lawyers should ask pertinent questions and clients can often judge how well the lawyer understands the basic issues surrounding the accountancy industry from the sorts of questions they ask and their understanding of the responses given.
Availability and Speed
Many business owners take the fact that their lawyer is very busy as a sign that they are good at their job and therefore have lots of business. Although this may well be true, it can also be very frustrating when trying to speak to someone or organise a meeting. Conversely, a lawyer who seems to have no other business at all may not be the best choice either. A lawyer should be able to confidently answer questions about workload, and how much time they will be able to devote to each and every case in their workload. Questions should also be asked about how quickly calls can be returned or letters and emails replied to. Most good legal representatives will try their best to reply to correspondence and calls as soon as possible, and should be able to give estimates about how long they think they will need to complete the legal process for the deal to be completed.
Cost
Legal advice is not cheap, but getting it wrong can ultimately bankrupt a company involved in lengthy legal proceedings. Many legal firms will work on a set fee basis, and will be happy to send out a contract with a standard list of fees before work starts. This will enable a buyer or seller to accurately estimate how much the fees will be to manage the transfer. Other legal firms prefer to work on a per hour or per item basis, and in these cases it is essential that there is a good estimate of how many hours it will take to manage the transfer to allow a client to estimate their costs. Several quotes should be obtained to allow the client to compare different companies, and estimates which are much higher or much lower than the competition should be disregarded.
Indemnity and Insurance
Whatever option a buyer or seller chooses for their legal representation, the legal representatives working on your case should be registered and regulated by either the Law Society or the Law Society Scotland, depending on where they are located. These professional bodies give legal protection to clients in the event that the advice they are given is wrong, or the legal process is not properly followed. For complex business sales, firms who specialise only in the conveyancing process for residential properties are not appropriate and cannot be considered.
