Getting Dressed Up For the Dance: How to Prepare Your Company for a Sale from a Legal Perspective
Posted on Mar. 12, 2013

Part 2 of 2

In Part 1 of this blog, we discussed how failing to prepare your company for sale in advance of the sale transaction can have disastrous consequences for you.  There are a number of relatively painless legal steps that you can take now to protect your company’s valuation, lower your potential post-closing liability, lower your M&A legal fees, and make the sale transaction quicker and smoother.

CLICK HERE for Part 1.

In Part 2 of this blog (below), we will discuss how far in advance of the sale transaction you should begin preparing your company’s legal affairs, how the buyer will discover whether your company has legal problems during the sale transaction process, and what some of the biggest legal issues are that tend to trip the seller up during the sale transaction.

When to Begin Preparing Your Company’s Legal Affairs for a Sale (or “What I Learned from Watching My Sisters Get Ready for Prom”)
Now let’s turn to the question of how soon to begin preparing your company’s legal affairs for a sale.  Have any of you had a sister or daughter who went to Junior or Senior Prom in high school?  How long before the dance started did she start getting ready?  Dress shopping?  Getting a manicure and pedicure?  Having her hair done?  Putting on her makeup?  Getting a fake tan?
In my experience, they start getting ready for Prom several weeks beforehand.

This analogy is apt for selling your company, because corporate lawyers often refer to preparing the legal affairs of your company for a sale as “Getting Dressed Up for the Dance.”

Question:  How soon before selling your company should you seek to get its legal affairs in order? 
As a corporate and securities lawyer who represents the sellers frequently, I’d recommend you always have your company’s legal affairs in order.  But, at the very least, I’d recommend that you work with a seasoned corporate and securities lawyer to get your company’s legal affairs in order six to 12 months before you put your company up for sale.  If you want to do estate planning in connection with the sale of your company (after all, what are you going to with that $20,000,000 check anyway?), I’d recommend you start preparing three or more years in advance.

You May Be Asking Yourself—“But How Is the Buyer Going to Find Out Whether My Company’s Legal Affairs Are in Order?”
If the buyer is savvy, and if the deal is important to the buyer, no stone at the seller’s company will go unturned during due diligence.  And the sale document will have something nasty called seller representations and warranties, with corresponding seller disclosure schedules, in which the seller will have to tell the buyer about every wart, hair, or fleck of mud on the hog. 

How to Prepare Your Company for a Sale, from a Legal Perspective
I’ve given you a few reasons to get your company’s legal affairs in order well in advance of a sale.  While the process of preparing each company for a sale is a little different, there are certain areas that generally tend to trip the sellers up.  These include the seller’s capitalization table, equity incentives like stock options, compliance with laws and regulations, intellectual property protection, liens on assets, employment issues, tax problems, board and shareholder minutes, proper corporate formation, the corporate veil, conflicts of interest, retirement plans, major contracts with customers, suppliers, resellers, licensees or licensors, etc., and legal disputes.  If you’d like to discuss these areas in greater detail, please call or email me. 

Save Yourself an Expensive and Frustrating Headache
In summary, it’s cheaper, less troublesome, and less risky to get the company’s legal affairs in order well in advance of a sale.  Doing so also helps protect the value of the deal and other important deal terms.  Begin cleaning up legal affairs at least six months in advance of a sale, or at least three years if there are estate planning considerations.  Remember:  The buyer will discover whether your legal affairs are in order.  You can’t hide the disarray.  There are many ways to prepare your legal affairs for the sale of the company, or to “Get dressed up for the dance.”  Hire an experienced corporate and securities lawyer to assist you with the process.


Alexander F. Kennedy is a business lawyer at the law firm of Jones Waldo Holbrook & McDonough PC in Salt Lake City. He can be reached at (801) 534-7224 or

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Department Chair

robRob M. Alston

Rob is serving his second year as chair of the Jones Waldo Business Department.

His practices focuses on mergers, acquisitions and reorganizations of all types (buying, selling, combining and restructuring businesses) and transactional work involving values from $100,000 to over $500 million.

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