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The Practice of Law

Ten Days to Close

One of my best clients was a partnership between two men who I will call Ken and Gordon.

Ken was the sales guy.  Gordon was the strategic thinker and administrator.  The company had offices in several Canadian cities and a few U.S. states.  There were a good number of companies and trusts on the corporate chart.

Ken and Gordon owned the main company, which had made money for many years and was valuable. It was financed by bank loans secured by personal guarantees of the owners.

The group had expanded to other provinces under separate companies with minority shareholders who ran the local operations.  In one of those companies the minority partner did a great job and the company in which he held equity was valuable. Two of the other companies had nominal value.

One day Gordon came to me and explained that he had a problem. The companies were losing money. Although they had significant retained earnings left to burn through, the problems had to be addressed.

Gordon explained that in normal times he would make the hard decisions and right the ship. He had been there before and he knew what to do. However, these were not normal times. He had been diagnosed with terminal cancer and given six months to live. He did not have the strength to focus on what had to be done. Ken could not run it all by himself.

Then Gordon told me that he had a Letter of Intent to sell the business. It was a bargain basement price, but sufficient to pay the debt and generate enough funds for his family and Ken to be financially secure.  However, the purchaser, a public company, insisted that the deal close by the end of their reporting period, which was in ten business days.  They had a due diligence team on stand-by and if we would not commit to close the deal in ten days, their team would move on to the next deal.

Closing this deal was the difference between financial security for Gordon and Ken’s families and the potential for corporate and personal insolvency.

The deal closed on time, although it was not easy.  I left for the closing meeting at 5 am, on three hours sleep, after several very long days.  Twenty-one hours later, at 2 am the next morning, we were still at it. I was drinking Diet Pepsi for the caffeine to stay awake.  Somewhere around midnight I spilled it on my laptop which was the end of that computer.

So here is why we were able to close a deal which would normally have taken several months in ten business days:

  1. Our clients were honest and trustworthy. Due diligence did not disclose any significant issues.
  2. The purchaser’s law clerk spent a day at my office going through all of the minute books and found nothing of significance to complain about, because my phenomenal corporate clerk had been managing the corporate records for over twenty years. 
  3. The minority shareholders, who had no reason to be cooperative, had all signed shareholders agreements with drag-along clauses and powers of attorney which allowed our client to complete the deal on two days’ notice over their objections.
  4. The lawyers on each side were civil, capable, cooperative, and practical.
  5. I had a great team around me that was able to pitch in and help.

However, the most important reason that Gordon’s family and Ken were financially secure following Gordon’s death is that Gordon and Ken had always been willing to spend money to maintain corporate records and to properly document their business relationships, so that when the purchaser did its due diligence there were no major issues and we had a mechanism to deal with uncooperative shareholders. Unlike some of my other clients, they had listened to and valued legal advice and spent money to do things properly.

Oh, and Gordon and Ken had a phenomenal lawyer. That helped too.

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