Transaction counsel

What this seat actually does

Transaction counsel structures the deal, drafts and negotiates the letter of intent and the purchase agreement, runs legal diligence, and manages the closing mechanics. The purchase agreement is where the price you agreed either survives or quietly erodes, through indemnification caps, baskets, escrow, survival periods, working capital adjustment mechanics and the definition of what counts as a breach.

They also protect you from yourself at the letter of intent stage. Owners routinely treat an LOI as a non-binding formality and sign one that has already conceded the structure, the exclusivity period and the adjustment mechanism, at which point most of the leverage is gone.

When you need one

Before you sign anything, including the non-disclosure agreement and certainly before the letter of intent. This is the single most common sequencing failure in first-time deals.

How they charge

Usually hourly, sometimes with a fee estimate or a cap for defined phases. Ask for a written estimate by phase and ask what typically causes an overrun, because the honest answer, which is a disorganized counterparty or a company whose records are a mess, tells you something about your own preparation.

A fixed fee for the letter of intent phase alone is often available and is money well spent.

What to ask before you hire

• How many private company transactions of roughly this size did you close last year?
• Are you usually on the buy side or the sell side, and which are you better at?
• Who else at the firm will touch this, and at what rates?
• What are the three provisions in a deal like this that most often cost your clients money after closing?
• Which specialists will we need for tax, employment, benefits, IP, environmental or regulatory, and are they in house?

How to compare candidates

• Deal count in your size range beats firm prestige and beats loyalty. A superb general counsel who does two acquisitions a decade is a liability in this seat.
• Ask them to explain an indemnification package in plain language. If they cannot, they will not explain it to you at midnight before signing either.
• Judgment about which points are worth fighting for is the whole value. A lawyer who fights everything will cost you the deal or the relationship with the buyer.

The mistake owners make

Using the family’s longstanding business lawyer out of loyalty. The loyalty is real and the expertise is a different specialty, and the kind way to handle it is to keep them in an advisory seat while a transaction specialist does the deal.

What this is not

Not your general business counsel, not your litigator, and not your estate planner, though all three may need to be in the room at some point.

The Institute accepts no payment from any advisor, takes no fee tied to any transaction, and does not place or refer professionals for compensation. This entry describes a role, not a recommendation of any firm.