A common question I encounter is, "Why do you keep telling me the other side of this transaction needs counsel?" This concern typically arises in two scenarios: either the parties believe they have negotiated most of the deal and want a single lawyer to finalize it, or one party has engaged me while the other has decided to proceed without representation. Regardless of the situation, my recommendation remains consistent: both parties will do better if each side has its own legal counsel.
When the other side is unrepresented, it may seem advantageous for my client. After all, I am drafting all the documents and inherently biased towards my client’s interests. But this perceived advantage rarely works out. My goal is to document a quality deal that ensures that my client will get what he or she expects. I will negotiate for my client, but I am not here to trick the other side into an unfavorable agreement.
A single lawyer cannot effectively represent both sides in a transaction. Not only is it ethically questionable, but a big part of the lawyer’s role is assessing and documenting the risks and benefits for each party. When parties are amicable, they often downplay potential issues, believing they can resolve them later. However, this tendency can lead to significant problems when conflicts arise, and parties start questioning why the transaction documents did not anticipate these issues. Addressing these matters during the transaction is far preferable to raising them in a series of cautionary emails that will result in issues down the road.
Mergers and acquisitions deals are complex transactions. Most business owners do not have the time or expertise to understand every detail, which is why they hire M&A lawyers. When the other party is unrepresented, I often end up spending excessive time covering basic concepts with them, which increases costs for my client. Legal fees are not the only concern. Unrepresented parties often overlook crucial parts of the documents, either because they do not understand them or because they assume it is all standard and safe to sign.
Every clause in a contract serves a purpose. Lawyers draft lengthy and detailed documents because they have seen or heard of countless ways things can go wrong. Cutting parts of the contract or assuming everything will be fine can lead to severe consequences. For instance, if a party ignores representations and warranties, they might make promises they cannot keep. Ignoring indemnification clauses can result in unexpected liabilities. Discovering undisclosed problems after the transaction closes can leave parties with liabilities exceeding the transaction's value.
In conclusion, both parties having legal counsel is an important component of a smooth, efficient, and transparent transaction. It prevents conflicts and misunderstandings that can arise from overlooked details or unanticipated issues. Ensuring both sides are represented helps achieve this goal, making the transaction process more efficient and the outcome more satisfactory for everyone involved.
If you have any further questions about why both sides need representation or any other legal concerns, please feel free to reach out. It's always better to address these issues proactively than to deal with complications later on.
