The Importance of Follow-Through and Tying Up Loose Ends

Averting a crisis is exciting! Negotiating a deal is exciting! Closing a deal is exciting! Moving on to the next deal is exciting! Making a follow-up “To-Do List” and completing the tasks on that list is not. However, I see time and again situations where important post-closing items fall through the cracks and ultimately end up costing parties time and money – often resulting in lost opportunities, disappointed expectations and a failure to obtain the full benefit of the bargain that was struck.

So what are some of the most common examples of poor follow-through? You might be surprised – they include failure to:
• actually sign the transaction documents, or to obtain all necessary signatures from parties such as, e.g., guarantors;
• obtain final executed documents and keep them where you can locate them in the future;
• attach critical exhibits – like legal descriptions, product schedules, minimum purchase quotas, etc.;
• obtain bonds, proof of insurance or important loss payee designations;
• docket important future dates, like delivery of tax returns, financial statements, renewal/termination dates, etc.;
• properly file (or to promptly file) documents such as mortgages, UCC financing statements, patent applications, etc.;
• follow the terms of the transaction documents, or to execute an amendment when the deal changes;
• require the return of confidential information and business assets such as copies of agreements, customer lists, product specifications, laptops, cell phones, etc. upon the termination of a business relationship; and
• obtain required approvals from lenders, shareholders, directors, etc.

The above items are merely examples of failures to follow through that can have a devastating impact on a deal or company. My advice – don’t be the company that fails to follow through by tying up the loose ends of your deals. Make post-closing checklists; prepare executive summaries of important agreements; docket dates; keep originals (or at least copies) of important agreements where you can locate them; and most importantly, take the necessary steps to realize and protect the value of your deals!

Avoiding Surprises in Transactions – Part 1

Surprises may be great for birthdays and holidays, but they have no place in business deals, where they generally cost time, money, and sometimes even the deal.  That’s why there’s such value in predictability, certainty, process and control.  Lawyers and clients are a team and as such, should work together as closely as quarterback and wide receiver or pitcher and catcher to understand each other’s preferences, tendencies, strengths and weaknesses, and to “game plan” a particular legal situation or transaction so that, come “game day,” there are no surprises.

While complete control and absolute certainty are generally impossible – whether you’re forming a business entity, negotiating a merger or acquisition, conducting a securities offering or even litigating a case, the more certainty attorney and client can have, the better. 

I’ve found the most effective way to avoid surprises is effective and clear communication between attorney and client from the outset, so that the attorney clearly and fully understands the client’s expectations as to:

  • Timing – including deal timing and response times;
  • Communications – who should the attorney communicate with at the client’s organization, and how (e-mail, telephone (are voicemail messages ok?), fax, letter)?  Can the attorney communicate directly with the other side, and if so, do all communications need to be cleared with the client first?
  • Work Product – does the client prefer detailed legal memoranda or a simple phone call with the attorney’s thoughts/recommendations?
  • Scope and Responsibility – who will handle what issues/tasks?
  • Urgency – how important is this deal to the client?  Are there any “deal-killer” issues that would cause the client to walk away? 

The other thing I’ve discovered is it is almost always beneficial to lay out at the very beginning the likely course that a transaction will follow, including stages, structure, timing, transaction documents, pre-closing conditions, closing, post-closing follow-up, etc.  Equally important is to communicate and modify the plan as necessary throughout the transaction as things change.

In Part 2 of this post, we’ll apply these principles to a hypothetical acquisition.

Boilerplate and Forms

The terms “boilerplate” and “forms” are often used interchangeably to refer to a “standard” document or provision used for a recurring situation.  However, businesses err when they take a “one size fits all” approach. 

There’s an important distinction between “boilerplate” and “forms.”  There is no such thing as a boilerplate document.  If a deal is important enough to have a legal document drafted, then it’s important enough to consider what that document should say.  After all, it’s being prepared for specific parties and for a specific deal, not for anonymous parties A and B in connection with X transaction.

Compare the boilerplate concept for an asset purchase to buying a motor vehicle.  If a boilerplate document works for all asset purchases, then any motor vehicle will work for any situation.  But when you buy a vehicle, you consider:  who will drive it; in what conditions; for how many people; with how much cargo; for what purposes; whether mileage/comfort/features are important; etc.  You don’t want a monster truck for taking kids to the pool, and you don’t want a Mini-Cooper to drive the 8-person family and tow the boat on vacation.

Forms, on the other hand, can have a valuable role as either:  (a) a starting point in a reasonably common transaction; or (b) a uniform way of structuring and documenting the relationship of a specific business with multiple similarly situated parties – e.g., a dealer network or parts suppliers.  In these contexts, they add efficiency, increase value, reduce legal costs and time delays, and bring uniformity – BUT only if developed and used properly – as a starting point in the first context, modified to fit the specific context; and as a custom form developed for this specific business to achieve its specific objectives, in the second context.

At BizB4Law, we recognize value and efficiency and want to help you achieve both through the proper development and use of forms – for your business and to meet your objectives.