Do you use an attorney when Investing in Searchfunds?
January 14, 2023
by an investor from Florida State University in Atlanta, GA, USA
Do you use an attorney when Investing in Searchfunds? If so, at what point do you decide to bring them in to help?
Bonus Question: How much should you expect to spend on one?
I am currently looking to Invest in a deal and trying to decide if it's worth it to have an M&A lawyer.
from The Johns Hopkins University in Basking Ridge, NJ 07920, USA
When you decide to bring counsel in depends on your comfort with the process and the transaction. Generally, I advise clients (and potential clients) to nail down as many business terms as possible so that you minimize the possibility of spending too much money on advisors before you have an agreement in principle - whether through an LOI, MOU or otherwise. Some clients are ok handling the LOI-stage without counsel, but if you are new to the process, I recommend getting some advice before agreeing to an LOI. Oftentimes, this will be money well spent that you can use in connection with future transactions and hopefully avoid missteps. Contrary to common perceptions, mistakes can be made in an LOI that affect the overall transaction.
As for cost - this is difficult to answer in a vacuum. Oftentimes, this is related to (a) how much involvement/help you need from counsel and (b) how experienced opposing counsel is. Some attorneys think that it is his/her job to be contrarian to demonstrate value and sometimes you get an attorney on the other side that, bluntly, does not know what he/she is doing but did a great job helping seller buy the proverbial warehouse 20 years earlier.
One key point - deal size is not directly correlated to cost. While a smaller deal may have less diligence, there are certain legal tasks that must always be undertaken regardless of size. Additionally, smaller deals are often less organized and require more work to get ducks in a row. This is why planning is important.
All of this being said - good luck! Happy to consult on your potential transaction if of value.
from University of Illinois at Urbana in Naperville, IL, USA
You should have an experienced attorney, representing you, at least reviewing anything you would be signing beforehand to counsel you on any red flags, the risks you are taking, how you might minimize those risks, etc. If you are a third-party investor in the deal, lawyers for the parties doing the deal are not representing you or looking out for your best interests. When a deal goes south, there could be quite a bit of conflict between those who are parties to the deal and their third party investors.
As for costs, it’s not possible to say anything without much more information. like ^redacted said.
Good luck!