2025 M&A Lessons - #5 Being a Smart Business Owner or Business Attorney ≠ M&A Ready
In 2025, beyond the half dozen acquisitions we actually closed, we gained deep insights from multiple other transaction that fizzled before the finish line. Some of those deals died shortly after the LOI was signed. Others, unfortunately, fell apart well after we and our clients had gotten deep into diligence and we had drafted and begun negotiation the definitive transaction documents. As a benefit of the hundreds of hours spent on these deals, we learned, some substantive, some more telling about human nature. We are counting down our five biggest takeaways about M&A from 2025, beginning with #5….
#5. You can be a smart business person and not understand M&A; corollary - “business attorneys” are not necessarily M&A attorneys
Before this latest ETA wave, the average small business owner rarely, if ever, dealt with M&A. They may be sophisticated and successful in operating their business and have no real clue of what the M&A process entails. You don’t necessarily need to be good at M&A to become the leading [insert boring business] company in your geographic region.
So when it’s time to sell, we see sellers look for analogies — analogies that vary in usefulness. They look to real estate, which shouldn’t surprise you as it often represents the only big-scale commercial transaction they’ve witnessed/closed.
Two big, but problematic conceptual points we see new sellers (and new brokers) try to bring over from real estate:
Earnest money - you have to put a deposit on this business along with your LOI to even start diligence.
No diligence allowed/ Caveat emptor (“let the buyer beware”) - "we don’t have to reveal any issues with this business even if you ask directly"
Bonus (Rigid Templates): The Seller or broker demands “Sign this purchase agreement right off this broker website [instead of having attorneys draft and negotiate appropriate transaction documents].” (We obviously added that last, unspoken part)
To be clear, M&A is not real estate although it often involves real estate. Unlike with real property, when you sell a business, caveat emptor does not apply, in general, but especially in a stock sale. You are selling securities and have legal obligations not to mislead the buyer (including via omission). These obligations are further solidified via the express representations and warranties (which are a standard part of a purchase agreement in M&A). The existence of legal and financial due diligence that leads into tailored reps and warranties are why using a pre-canned “purchase contract” from a buyer website does not work in most cases for M&A.
Business Attorneys
If they don’t encounter M&A in their regular business operations, of course, many successful small business owners also don’t have, or even know, an M&A attorney. It’s deeper than that, however, as the Seller might not even realize that M&A is something outside of the expertise of their “business lawyer.” They do not see any reason why their real estate, tax, estate planning, or divorce attorneys might lack the necessary experience to handle the sale of a business. Even corporate transactional attorneys who strictly do startup formations and VC financing work without any M&A might not be equipped to provide effective counsel on a small business sale.
I respect my colleagues of various practice areas, and because of that, I don’t try to jump into their worlds (without hours of study and time learning on real matters supervised by an experienced attorney).
A big adjustment as part my move from big cap deals down to the lower middle market has been the wide range of experience (or lack thereof) by the attorney across the table from me. I’ve had less experienced attorneys or former litigators that clearly put in the work to learn M&A - those deals run relatively smoothly.
But my colleagues, clients, and I also have horror stories from other deals. Deals where the counterparty, (often the seller/broker) brings lots of ego and argumentativeness without experience to justify. And those deals cost everyone." - Denzel Cadet
Stay tuned for #4 - where we'll get emotional...
Disclaimer. The contents of this article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Your viewing and/or use of the contents of this article do not create an attorney-client relationship with Cadet Legal. The contents are intended for general informational purposes only, and you are urged to consult with counsel concerning your situation and specific legal questions you may have.
