This is an invitation to all of the Sellers out there, selling a business for the first time, all Buyers out there, growing by acquisition, and those non-lawyers that advise them throughout that journey. An invitation to what? M&A is often seen as a mystery of process, where lawyers have all the answers and clients are blindly led down a path with a blank check of legal fees until suddenly . . . We’re closed! Today, we start a blog series geared towards demystifying the M&A process for buyers, sellers, and those that advise them. In that process, we are going to talk about a new services line – Fixed Fee M&A. You read that right . . . We believe it is possible! We hope you join us in the weeks and months to come, and share feedback on what makes sense now, what’s confusing, and where you would appreciate more information. Thank you for adventuring with us!
First in this blog series . . . The process of M&A and how it could be done differently:
The idea of Mergers and Acquisitions often evokes the glass towers and lofty executive suites of Wall Street. Let us dispel that notion, because transaction volume is greatest on the Main Street level, not the Wall Street level. Far from the headline making Twitter debacles and Succession level intrigue of the common perception of M&A practice, mergers and acquisitions services most often focus on the less sensational work of the packaging and sale of the life’s work of a family or small group of owners, or the purchase of an opportunity by an ownership group setting out on a new journey. The lack of salacious details and Billion-dollar valuations does not mean that the typical M&A transaction is free of drama or harrowing moments. Even a relatively small M&A transaction is a complex, multi-disciplinary transaction with a number of parties, advisors and moving parts to manage and coordinate. Regardless of dollar value, the stakes are high when the subject of the transaction is the sum of a career — or the legacy of several generations. It’s important to get it right and partnering with quality professional service providers is the best way to ensure that it’s done well.
The unique nature of business transactions creates challenges for efficiently structuring and carrying out purchase and sale of businesses. The vast array of asset base, ownership dynamics, and tax considerations of a business sale make it impossible to adequately distill the transaction to an automated process. As technology and standardization have enhanced expectations of efficiency and predictability, business transactions are stuck in the analog world of traditional consulting services.
This has left business owners with two primary paths for handling the legal aspects of a transaction: traditional legal services or self-help.
- Traditional legal services are great at accomplishing the goals of the parties but come at a cost that can be a larger part of the transaction value than small business owners anticipate - especially when they’re counting on the sale proceeds for retirement (and often don’t adequately consider the tax consequences of the sale).
- Self-help may feel like it’s priced right — but can leave loose ends and unintended consequences can require years of clean up. These deficiencies can result in legal and tax bills and other liabilities that end up costing more than it would have cost to have qualified counsel in the first place.
Our question: Is there another way? Is it possible to offer fixed fee legal services for M&A transactions in the $500,000 to $15 Million Dollar range?
We think it is, and we’ve been working this year on a model for fixed fee and predictably priced services for these transactions. We’re not talking about forms and fill in the blank contracts and three hours of consultation — we intend to offer full legal services, we draft the documents that are curated to your legal needs, you call when you need legal counsel support, but with price transparency.
Running complex transactions with predictable pricing means rethinking M&A transactions. It means building processes and tools for accuracy and efficiency. It means setting the plan and expectations appropriately and then executing at each step. It means cutting excess and duplication without cutting corners. If you are familiar with Stock Legal’s fixed fee company legal foundation work, you know we’ve been working on this concept for over five years already!
This is not something that counsel can do alone. It requires an educated and empowered client who is willing to play an active role in the transaction and bear responsibility for delivering his or her part. It will require good faith and good communication from very earliest stages of the transaction.
This project will require tools, discipline, follow-through, administration, trust, and time as the process is rolled out, vetted, reviewed, refined, and tried again. It will require an open mind and patience, as paper and processes are rolled into digital tools. It will require moments of inefficiency and lack of scalability as we develop this process in parallel with traditional services because these are real businesses, real money, and real livelihoods we’re working with. It will require a belief that there is a way to get this done — and acceptance if it turns out it cannot. And we’re going to work our way through it all right here.
Over the next several months we’ll be laying out the philosophy, mechanics, and terms of the concept in a series of posts on this site. As we led with, this is your invitation to join us as we explore this concept, develop tools and methods, an optimize a process for delivering the services of a mergers and acquisitions practice aligned with the expectations of the 21st century business owner.
Next up – What does it mean to have a “fixed fee” in legal services, and how that differs from a normal M&A transaction?