How to navigate legal issues when buying or selling a business

An Interview with Achim Neumann from A. Neumann & Associates, President of a leading Business Brokerage in Pennsylvania, New Jersey, Connecticut, Maryland and Delaware.

Achim Neumann Business Broker

Firstly, thanks so much Mr. Neumann for taking the time to answer our questions today. We’re spotlighting Mergers and Acquisitions this month and A. Neumann & Associates were referred to us as experts in M&A, knowledge on legal issues when selling a business/buying a business, etc.

Thanks for having me! My firm, A Neumann and Associates, LLC, has worked on and consulted within a wealth of business transactions, so I appreciate you reaching out for me to help answer your questions.

Firstly, what are 3 things you would quickly advise a business owner on in the preparations of deciding to sell their business? You can keep it short and sweet as we know you could probably go all day!

Most importantly, a business needs to get a fair market valuation into place. It will serve many different purposes: it will obviously establish a value. But it will also insert a discipline to collect all the proper documents needed for a sale. Further, the valuation will allow a buyer to make an offer sooner, and it will allow the business owner to sell faster.

If someone decides to hire a business broker to assist them in their acquisition or sale, how should they go about it?

When evaluating different Mergers & Acquisition professionals and business brokers, make sure that they have complete answers to all of your questions. New Jersey remains a State with no regulation or licensing required to be in the industry, thus, your evaluation becomes ever so more important to selecting the right individual. Other states have similar lack of regulations as well.

Here is a list of things to keep in mind to check up on any potential advisor’s credentials:
• Is he/she a business broker, or merely a real estate broker attempting to sell businesses?
• Is he/she affiliated with any key business brokerage organizations?
• What is the educational background of the professional? Is it Verifiable?
• Does the professional have a financial-based education, is he familiar with business/personal tax issues?
• How long has the firm been operating for?
• Is the broker the principal, or simply an employee with little vested interest in the the business?
• Other than the brokerage business, has the broker run a business before and thus, can relate to your concerns?

We’ve written about this topic pretty extensively and you can read about it more on our website if you’re interested,

We all know legal issues arise when complicated transactions happen, especially when buying or selling a business. What is the best way to avoid a lawsuit from the beginning?

Preferably, a seller has a qualified TRANSACTION attorney in place well ahead of the contemplated sale. This will allow the seller to obtain proper legal advice all the way. The same, by the way, also applies to having a CPA involved.

We sometimes run into the situation where the seller does not have an attorney, and waits until he has an offer “on the table”. This is not an intelligent move.

Offers that are made by buyers are subject to a final Definite Agreement, drawn up typically by the sellers attorney. Such an agreement needs to be reviewed by both parties, and should outline the parameters of the deal, and should prevent lawsuits.

If someone finds themselves being served in the process of selling a business, what should they do?

The first thing they should do is contact their attorney that they should already be working with. Don’t let anyone besides a qualified business attorney give you legal advice.

What sorts of things should be in contracts to ensure a disgruntled buyer doesn’t try and sue after a transaction has occurred, and if they do, that you as the seller are protected?

Usually there are Warranties and Representations in the final Definite Agreement, under which a seller states what he/she “warrants in the sale”. Between such warranties and the prior due diligence executed by the buyer, the buyer should have a fairly good idea of what he/she is buying.

Usually, there are few law suits after a transaction, as a matter of fact, we have seen none for the transactions we closed in the past 10 years due to prior planning, performing due diligence, adhering to the law and

Thank you so much once again for answering our questions.

Thanks again for having me!