Spring 2017 / Volume 15, No. 1

GROOMING YOUR COMPANY FOR SALE

Many business owners decide that the right time to sell their business is when they are ready to retire or when they face personal events such as health issues or a need for liquidity.  But successfully selling your business, whatever the reason, requires planning that begins well before you are ready to move on.  The decision to sell should be based on a careful examination of the industry, your company’s recent performance, and its prospects for future growth.  Personal needs and desires should not be the only factor in deciding when to sell.

Prepare Your Company for Sale.  The first step in selling your business is to get your house in order. Look at the aging of your receivables and write-off or put out for collection those over a certain age.   Check to see how much of your inventory is saleable.   Understand who are the key stakeholders in your business, whether they are employees, vendors or customers.  These people and businesses impact the value of your company.  Do you understand both your company’s strengths and weaknesses?  You will need to emphasize your company’s strengths, but you should disclose problems up front while they can still be resolved.  Potential buyers surprised with bad news at the last minute may head for the door.

How Much is Your Business Really Worth?  Our experience is that most, but not all, business owners have a pretty good idea of what their business is worth.  However, many sellers feel that just because they are selling their business doesn’t mean that they must give up all the benefits of ownership. You should not expect that the buyer will want to pay a large premium for your business, nor is it likely to pay for your health insurance, a company car, or your country club dues, or keep your relatives on the payroll.

Finding the Right Buyer.  Finding the right buyer is crucial to a successful transaction.  For service businesses or professional practices, the right buyer is often a key employee or group of employees who have the necessary relationships, or who can quickly develop the necessary relationships, with customers, clients, or key vendors.  Manufacturers can usually locate financial or strategic buyers.  Distributors may find that the best buyer is a key vendor who is looking to acquire authorized dealers.

Are You Willing to Work for the Buyer?  If you are selling a service business, your continued participation in the business post-closing may be crucial to the success of the transaction.  Do you want or need to continue working?  Will the buyer require you to continue working?  If you are accustomed to always making all of the decisions, how well can you work in a large bureaucracy or with someone else in charge?  You may find that it is an uncomfortable fit.

Hire Capable Professional Advisors.  Even sophisticated business owners do not have experience in buying or selling a business, and therefore it is imperative to get advice from experienced and capable professionals.  A business broker or investment banker who knows your industry can help you find potential buyers and maximize the sale price for your business.  You will also need a lawyer experienced in handling business sales, mergers and acquisitions.  A qualified accountant is another important part of the business sale team.

Hire Capable Professional Advisors.  Even sophisticated business owners do not have experience in buying or selling a business, and therefore it is imperative to get advice from experienced and capable professionals.  A business broker or investment banker who knows your industry can help you find potential buyers and maximize the sale price for your business.  You will also need a lawyer experienced in handling business sales, mergers and acquisitions.  A qualified accountant is another important part of the business sale team.

By:  Leonard J. Gambino

 


YOUR PLACE OR MINE?  USING FORUM SELECTION CLAUSES IN CONTRACT

Under applicable contract law, the parties to a contract are given great leeway in determining what provisions to include in their agreement.  For example, they can agree to forego filing a lawsuit if any dispute should arise between them and instead have their differences resolved by either an arbitrator or a mediator.  They can also generally choose which state’s law will control the interpretation of the contract, or to govern any disputes arising under the agreement. 

Forum Selection Clauses.  One common provision included in contracts is a “forum selection clause,” by which the parties provide for the resolution of any legal disputes by a court in a certain jurisdiction.  However, before agreeing to a forum selection clause, the contracting parties should ensure that it accurately reflects their intentions to avoid unexpected results.

Enforceability.  Courts generally look favorably upon contractual forum selection clauses and typically will enforce the parties’ agreement regarding where their dispute should be resolved.  Accordingly, if one contracting party files a lawsuit in a forum other than the one designated in the contract, the other party can ask the court to dismiss the case so that it can be refiled in a court in the agreed-upon location.  However, the wording of a forum selection clause can make a substantial difference in determining whether a lawsuit was brought in the wrong jurisdiction. 

Mandatory Clauses.  Courts recognize two types of forum selection clauses: mandatory clauses and permissive clauses.  A mandatory forum selection clause is one providing that the location designated in the clause is the only location where a lawsuit can be brought.  If the parties to a contract intend their forum selection clause to be mandatory, in order to ensure that a lawsuit can only be brought in the agreed-upon location, they should use language explicitly and clearly expressing their intention.  For example, the parties could state that “Any dispute arising under this Agreement shall be brought exclusively in any state or federal court sitting in Cook County, Illinois.”  Such language leaves little room for interpretation by the parties or a court and would likely be viewed as requiring a lawsuit to be brought in Cook County, and nowhere else.

Permissive Clauses.  A permissive forum selection clause, by contrast, specifies a location where a dispute under the contract may be litigated, but does not make that location exclusive.  For example, a contract can state that “The parties hereby submit themselves to the jurisdiction of the state and federal courts sitting in Cook County, Illinois.”  With this provision, neither party could argue that a lawsuit filed by the other in Cook County was brought in the wrong jurisdiction, since they agreed in the contract that a lawsuit could proceed in Cook County.  However, because the contract does not provide that Cook County is the only location where a lawsuit could be instituted, one party would not likely be entitled to argue that a lawsuit filed by the other party in another jurisdiction is improper under the contract’s forum selection clause.  Under a permissive jurisdiction clause, the parties agree only that the designated county would be an appropriate place for a lawsuit between them, not that it would be the only place the dispute could be litigated.

Conclusion.  As with any provision of a contract, careful attention must be given to the language utilized in a forum selection clause before the contract is signed.  If the parties want to ensure certainty regarding the location of a potential lawsuit under the contract, they must clearly set out the agreed-upon forum and exclude all others.  A failure to do so could lead to an unexpected result for one of the parties if it is sued.

By:  David S. Makarski


Introducing Andrew W. Holstine

Attorney Andrew W. Holstine has joined the Firm as a partner in the Corporate Transaction and Estate Planning Departments.  Andrew is an estate planning and transactional attorney with experience working with families and business owners in estate and business planning issues and corporate transactional matters. Andrew previously worked at Zukowski, Rogers, Flood & McArdle where he represented clients in personal estate planning, tax planning, business succession and a variety of corporate transactional matters.

Introducing Ehren M. Fournier

Attorney Ehren M. Fournier has joined the Firm as an associate in the Litigation Department. Ehren is a commercial litigation attorney with experience representing clients in a wide range of industries.  Ehren previously worked at Foley & Lardner LLP, where he represented clients in a variety of matters in state and federal court, arbitration proceedings, and mediations. 

2017 Leading/Emerging Lawyers*

The Firm is pleased to announce that partners Norm Finkel, Ron Silbert, Adam Glazer, Rich Goldwasser and Joan Berg have been named as 2017 Leading Lawyers* and Matt Tyrrell and Greg Mini have been named as 2017 Emerging Lawyers*.

Court Victory for Fitness Club

The trial victory of Firm partners Norm Finkel and Bill Klein in the case of Palmisano v. Bally Total Fitness Corp was featured in an article in the Chicago Daily Law Bulletin.  The full article can be viewed on here.

*Service Mark of the Law Bulletin Publishing Co.


Schoenberg Finkel Newman & Rosenberg, LLC (312) 648-2300

This Newsletter is not intended to be legal or tax advice and is not a substitute for obtaining legal or tax advice. This Newsletter is deemed to be advertising material by the Illinois Supreme Court.