A Merger-Acquisition Gone Wrong

Once in a while, an attorney hears both sides of a sad story. Recently, our firm obtained a sizable judgment against a debtor. Subsequently, we learned that company had sold its assets to a competitor for a seven-figure sum. That sale was supposed to allow the debtor to pay its creditors. There was a serious hitch. The purchaser over-extended itself and is now in bankruptcy. So, what is the “rest of the story?”

The original debtor made a fundamental mistake in negotiating the sale of his business assets. He allowed the attorney for the buyer to draft all the documents and trusted that the attorney would protect his interests. While, as a lawyer, I appreciate the faith that lawyers will be “fair” in all instances, this is not an issue of fairness. The buyer’s lawyer was hired to “zealously represent” its client. The system is predicated on the theory that each party will be represented and a fair result will occur through negotiation and careful drafting. Negotiations work because each party begins at their “best day” and they work towards the middle ground that will work for each of them. As attorneys, our role is to provide advice, and to review language carefully while anticipating the worst case scenario, then draft or negotiate to provide as much protection as possible from that outcome.

The moral of this story: When undertaking a purchase or a sale of a significant asset, seek the advice of counsel to review the documents and assist you in spotting areas of concern. Some outcomes cannot be prevented, but with appropriate drafting, you may well soften the landing if something does happen.