Managing Risks and Liabilities in M&A with Tina Kassangana

Today's episode is sponsored by Dealroom, the M& A platform for teams running buyer led M and A. If you've ever spent a Friday chasing five people to complete diligence tasks or watched integration timelines slip while everyone blames someone else, this is for you. Deal Room helps you stop herding cats and start aligning your team. You get project management built into the Deal Room with features like real time tagging, stakeholder alerts, task dependencies, and custom reporting. That means everyone knows what they're responsible for, when it's due and what's holding things up. On top of that, Deal Room customers hit their integration timelines 90% of the time. When integration stays on track, cash flows unlock faster, CFO is happier. Learn more@dealroom.net or click the link in the description. Now let's get back to the episode I'm Kisan Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Hello M and A Scientists. Welcome to the M and A Science Podcast. This podcast is part of a mission to rethink how M and A is done. The old school settle it approach is dead. Fire led. M and A is all about strategy, alignment and efficiency, putting value creation at the center of every deal. Let's be real, it's not just about closing the deal, it's about making it successful. We uncover what truly works in M and A by learning directly from the best. For episodes, resources and tools to elevate your M and a game, visit mascience.com follow us on LinkedIn if you find this content useful. Don't forget to leave us a review on your favorite podcast app so others can find us too. I'm your host Kisan Patel, Founder and CEO at Deal Room and Chief Scientist here at M and A Science. Joining me today is Tina Kasangana, M and A Lawyer Associate at Morit Hock and Hamroff. Morit Hock and Hamroff is a full service law firm known for its expertise in corporate law, M and A Real estate and commercial litigation, providing strategic legal support to help clients navigate complex business challenges. Today we're going to talk about how to manage risk and liabilities at M and A. Tina, thanks for hosting me at your office here in New York City.

Yeah, welcome to the New York City office and thanks for having me.

I love when we can make these interviews happen in person. Can we kick things off a little bit about your background.

Absolutely. So I am a fifth or sixth year associate. I always mess that up. But class of 2019, St. John's Law. I went to Syracuse University for undergrads, specifically international relations and poli sci. Interestingly enough, I actually wanted to be a sports commentator. So not a lawyer. But I had done lots of mock trials since sixth grade. And I realize that I'm acing all of these natural law theory classes and flunking comms communication, so I should probably look more into this legal stuff. Competed in mock trial, college, law school level, moot court at the vismoot second year. And a lot of professors are probably upset that I'm not a litigator, but I'm happily doing transaction.

You were like born for this as a kid and then you had all this experience doing mock trials. Like how does that flow into your practice today?

Honestly, it's taught me to synthesize a lot of information and make it all work. In mock trial, you have a closed universe of facts and I was always the closer. So I need to know everything that's in that little binder. However, I also need to pay attention to what's going on in the current trial. At the end of the trial, I now need to pick and choose what actually came in, what didn't come in for my little universe. And how do I need to make this work per trial? It's the same thing as an M and A deal. So there's the diligence. That's the universe. So if I do a tech company sale or fire suppression sale, I know the general universe of what needs to happen, but I need to tailor it to this deal, for example, cross examinations. That's just due diligence for me.

Yeah, I like it. It is a strong correlation there.

Yeah.

What have you done last five, six years of this firm? What kind of deals have you worked on?

So we mainly are seller side, but we've also done buy side. We've seen a trend to more private equity. When I started in 2019, the pandemic started. So I had to learn all about sell side PPPs escrow. Figuring all of this out during the pandemic, quite frankly. So we've done a lot of commercial businesses, we've done some accounting firms. So a lot of different areas of business.

I got to ask, how come it's always associate as a title for ever and then all of a sudden goes to partner? Why don't they have any different steps in between?

Sometimes they do. So some law firms, they'll differentiate the Associate to the senior associate to let you know that they're on their way on and up and up. But yeah, no, the associate track is a long time.

I just thought that lawyers aren't that creative because you go to a startup, we'll take that into 10 different titles. So you're constantly.

For sure. Yeah. Lawyers will just try to keep things as simple as possible when it's not deal related.

Fair enough. What stages in the M and A life cycle do the biggest risk happen or arise? How do they come about and how do we manage them?

As an attorney, I would say that risks come up in every stage. The biggest ones, I would say there's probably three primary buckets. You have your financial pre sell stage, that's where we talk about valuation risks. Then you have your in the middle of the deal you'll have your diligence risks and then you'll have your post closing risks. Where now did things go to plan? Sellers and buyers are fighting over earnout metrics. Someone did a capex that was not supposed to be spent and that affected the bottom line for calculations. Someone's upset that they're not actually running the business, which tends to happen with some of these smaller businesses. When they sell to a private equity fund. They're so used to running the business that now they're answering to someone else. And oftentimes there's personality clashes and some of those things can happen. And the risk that we try to mitigate at that point is if something like that happens, how can we get you out and how can we still maximize if there's anything on the back end for your back end payments? A lot of people talk about valuation gaps and how to deal with that with earnouts, seller notes, which are. As a seller's counsel usually I would not encourage things like that. And you have to be very clear in agreements. So with earnouts you have to figure out what are we actually looking for, what's the metric? Because it's not just revenue, it could be profitability. How are we defining profitability? I've heard accountants sometimes say that adjusted EBITDA just means deferred lawsuit. So we will heavily negotiate at the jump to make sure that everyone's on the same page. What are the accounting policies that we're using to calculate? So that's a risk already that we're trying to mitigate at the start.

Can we role play this out? Let's do both though. I'm always focused on the buy side, especially like right now I'm trying to look at Deals and build a pipeline and then we'll do the sell side. Yeah, I'll be your virgin client. First time doing a deal and part of it's like I don't even know how to work with an M and A attorney because I am that person that's going to draft my own loi. Sign it. Please don't. Okay, let's start there. Yeah, let's talk about. Got a company. So I got a couple of them actually in the pipeline that I'm looking at. I'm probably at early diligence. NDAs are signed. I'm getting the initial numbers on both of these targets. Got the first pass of diligence. I got it. I'm starting to work at putting a model together and it's looking interesting. I got a pretty good feeling that this is one we're definitely going to want to try to pursue. Okay, am I talking to you yet or not yet?

Not yet.

Okay. I get the model going and then I'm starting to wrap my head around what this company's gonna be worth. I feel it out for them just to be like, hey, are we on the same page about this? I'm gonna push them to do some seller financing.

What's the same page? So at this point, have you now already thought about some deal terms?

Yeah, for me, I'm always thinking the price. And as an early stage company, I wanna hold onto as much cash as possible. And if I go to the market, one, I wanna avoid equity. Cause that's definitely a lot of firms reach out to us about that. But we're growing fast. We're growing over 40% year over year. So when I look at the third party debt market for a tech company, private capital is going to run around 16% unless you're throwing a bunch of warrants in there. So then I'm like, wow. I try want to minimize that as much as possible too. So my goal would be to get the seller to take a bet with us, hold some paper and roll over some equity.

Okay.

Ideally like a third and third. Hey, I figure out how to get you a third in cash. A third and hold some paper, and then a third we'll roll over in some equity so you can give you the promise of the next exit or recap for us.

So based off of this fact pattern, this scenario, once you get to a point that you're actually really interested and you may set forth an offer, that's when you would call me. And also, since it sounds like you're very active in these transactions, you should probably just have also an attorney or a panel that are just on standby who know that you're actively looking for sellers. So that way we already know what your main target is, what your main interests are. So what you just shared with me, when you come now with another possible target, I'm already thinking about that third.

So I want to get to know you ahead of time, just know you. And then you got an idea like, oh, yeah, Kisan's out there trying to buy another tech company. And then once I get something in sight and I'm ready to put an LOI on the table, that's when you reach out. I come reach out you.

Yep.

Okay. So we did our analysis and we have an idea of what we want to pay. I have a good idea. And let's just say we'll use small numbers here. I know on this podcast we love talking about things in the billions, but I'm not doing that. I'm trying to the losing the virginity on this deal. It's really small. Let's say simple math, like $15 million, because it's easy to break that in thirds. So $5 million we will pay in cash and then 5 million we want seller financing with do a favorable, like 7% interest.

Okay.

@ least we want to propose it. Yeah. And then we want to roll over to equity another piece. All right, that's what I'm thinking to propose. How's that sound in terms of this. But I never did in this loi. What other things should I be thinking about? Terms that we would want to put in this loi.

What kind of acquisition is it? Is it going to be asset? Is it going to be equity? Because that'll also play a part in how we're structuring some of the finances. It also play a part in employment agreements. Are we going to tie rollover equity to employment to get them to stay in that type of retention? Most of the time sellers, if they have an office space or something, they're going to want that included in the loi. Are you taking it on or is it going to be excluded? So we're going to have to go more in a bigger picture in the loi. I hate to say big items, but it's usually the big items like the escrow. So in your 5, 5, 5. We also have to think about rep and warranty. So let's say hypothetically speaking, this is a fairly new company, but they're very attractive and you're not really sure what you're getting out of that 5 million upfront consideration. How much of that are you willing to put in escrow? And the seller is going to come to us as your counsel in this case. They want the least amount of money in that escrow. So some of those numbers may have to change. So the five that's in the seller financing, we might take two from there to put it in the upfront consideration and ask for a bigger holdback or a bigger escrow to cover for a longer period. So sometimes we'll have to play with the numbers like that.

Why do I care on the buy side about the escrow amount if it's all part of the total purchase price?

You'll want to care. Because we have had situations where buyer doesn't care and then they realize, wait, I don't have anything to go to. Sellers just sold their business. They don't really have anything behind for me to get money.

So I want this as assurance.

Exactly.

Hey, I found out your numbers weren't what you told me or some big thing changed.

Right.

Okay, so what was like the typical percentage or range that I would want to do on the buy side?

10% probably right now, I would say is market. But also this changes with rep and warranty insurance. Yeah.

I was going to ask the hot ticket item, which I think is now very mature. I feel like most deals use reps and warranty. Like you could buy a policy anywhere. Like people are selling that in the.

Corner here in New York, right on Canal street, actually. No, seriously, we've seen maybe 0.51%. However, the buyer will probably take over the main fees or they'll split it half and half with respect to the rep and warranty insurance and take that out of the proceeds. Yeah, Rep and warranty insurance changes a lot of numbers and also changes the transaction documents.

I think most deals are typically asset deals.

I would say 50. 50, I've seen.

Really?

Yeah. 50, 50. Yeah. Asset deals get just nasty and weedy. Especially when you have buyers that are kind of like, yeah, I want everything. And then sellers who think that they don't have anything and then you're pulling teeth like, okay, you do have stuff. You have furniture, you have equipment, you have inventory. Like you have stuff. So we kind of need to disclose. And it's not just, I'm selling my business carte blanche.

Minimize all the assets.

Yeah.

Versus what I would think is the people component would drive you towards the stock sale because that makes it smoother. Especially either people on Visa or people in other countries. They were like, oh, let's Just keep this intact and do it more as a stock but then carrying some liabilities, whatever they have pending.

That's actually when it's a stock sale. We really get into some aggressive negotiations with the indemnifications and any type of liabilities that are going to come post closing.

How do we manage risk? We're already at LOI and we're talking about a lot of stuff. Even just the structure between asset stock sale that we talked about the holdback because we're going to have that or we use a reps and warranty policy which can help alleviate that and then when. Because the seller will get their money and then they still get the assurance and typically the buyer pays for that policy.

Typically, yes, we've seen that.

Okay, what are the things that we need to.

So you just mentioned we're past the LOI stage now, everyone's happy, we sign, we're starting now some hardcore diligence.

Is that the main stuff though? Is it like, hey, here's the holdback and then are we going to go down asset versus do we make that decision at loi?

Yes.

Okay.

Or you could say that based off of tax council review, we may structure it, asset or equity. So you don't have to be so set in stone with respect to the structure, but the items that you definitely want to have. Set purchase price, who's going to come on afterwards, Key employees, Any other obligations that is really important to either party that you want to fight for upfront. We would typically suggest let's hash it out in the LOI already even though it's technically non binding.

So I could have like, hey, here's three key people we've identified. Like we want to have retention on these three people that they're agreed upon. And then yeah, it could be anything in terms of hey, this is the must have. You said this thing. You had this license agreement secured for 10 years and that's going to be critical to this deal. So let's make sure that's part of it.

Yep. And two months into the deal we're still going to run some QV, whatever, but we need to see profit increasing at X amount and then sometimes you'll have that and there may be breakup fee if someone doesn't hit a metric or everyone walks away pays their own respective fee. So there are also things like that.

Is it pretty loose because this LOI is non binding? I feel like there's a lot of diligence you can go to. I'm doing early stage stuff. I can figure out how to get to the value off the numbers pretty quick. But then there's a lot of okay, but is this churn rate what they claim it? Is there any little thing like that? They had said they don't have any change of control provisions in their customer agreements. I've had this before where all of a sudden you find out they had a bunch of change of control provisions.

Yeah, tends to happen.

Alice said it's like, whoa, how do we mitigate that risk? Because that's big surprise. Where do you strike that right balance? Because part of the other part of me is it's not mining. Then we find this stuff out later, we'll just walk away from the deal.

You can. So part of the LOI is trying to build a foundation of if we go outside of these bounds, like where then is the foundation going to completely crack and break? So as your buyer's counsel, I'm going to ask you what are the things in this LOI that are binding for us not with respect to seller. And if you tell me I need these three key employees and something comes up in diligence about these three key employees, we can walk away, we can terminate and say that this was in the loi, I've made it very clear that it was important to me. They can't sue you and then say that you're in breach because you promise X amount of right for a transaction and that these three key employees aren't going to come along. So they might spend some money, they have to pay some fees and then everyone just walks away. But the key thing about the loi, it has to be flexible to account for the diligence. Anything that comes up, that's the non binding nature.

What about the odd things that people bicker about towards the end of the deal like working capital allocation and stuff like that if you put that in their loi or are they just like, it's like the routine to go at the table and pound your fist.

So the problem with working capital is the first issue is you bring it up at the law that there's going to be a working capital adjustment that the parties are going to negotiate in the purchase agreement. It's one of those, we'll cross that bridge when we get there, but we're going to let you know that the bridge is there. And then when you actually get to the negotiations of the clause, that's when.

Yeah, okay, it's tough because all of a sudden you don't want to put too much because then you're setting this Tone like you're going to be a pain in the ass person to work with.

Exactly.

Okay, Fair enough. Loi signed. What happens next?

Okay.

Do I stop talking to you for a while? Do I start doing my diligence?

Oh, no. So. And we're keeping buyer's counsel. I'm going to warn you at this point to be on the lookout for another NDA from seller's counsel. Even though you signed the initial NDA for the finances. Now that we're gonna get some legal due diligence, there's gonna be another NDA because they're gonna wanna protect just in case if something happens. You've already seen their top customers, you've seen their top vendors. You shouldn't be allowed to use that. So don't be offended if they send you another NDA.

Step up NDA.

Then I'm going to ask you to set up a data room and we're going to prepare a due diligence request.

List as the buyer or seller.

Buyer.

This is cool. Because that's what we advocate for is buy side M and a buyer led M&A especially like a lot of rollups we work with. They have to control that process so they can plan integration better when they can drive the data room and the workflows around it.

Yeah. So you set the stage as buyer of what's the initial diligence request list. And obviously you can't think of everything that might pop up. But there are a few that I call the crucials. You're gonna need the legal. Can you sell this business? Who actually owns this business? If there are any tax issues. So sometimes if it's an asset sale and they're an S corp. When did they do the S corp election? Sometime. That messes with tax issues for them. Not for a buyer.

But I can set up all my requests in the data room and then the seller can fill all those requests.

At that point they'll start uploading them and you'll also send it to their legal counsel.

I like it. You're like fire. Let M and A approved. I want to work with you. Now we're going to go through this process. We put our requests in. I'm going to work with my different department leads because I want to know engineering's got their concerns. We'll consolidate that in our data room or deal room.

Deal room.

And there you go. We'll invite the seller to come in and start fulfilling these requests and that starts happening. We'll start doing our diligence and then we usually have A little findings area that we're going to centralize all our findings. Then what happens? Communication still goes with you. I know at some point you got to put the purchase agreement together.

As this diligence starts coming in, we are going to refer back to the LOI and touch base with you again. And at this point we've probably already run a tax analysis. Best scenario for you, hypothetically, let's say you're going to want to go with an equity deal in this one and we're going to present to you why. We're going to give you the different tax implications for both. If you go both, equity or asset, you'll make the decision based off of that. We will then prepare the purchase agreement in light of that. And we're also reviewing the diligence that's being uploaded in tandem.

Okay. That's a big factor is the tax because that's what's the end Victor going to look like financially. And then all these departments coming up with their findings and it's basically risk. They're identifying that, hey, there's this weird allocation they did from one year to the other. We want to make sure that's what it is. Or HR finds another key person that we need to really retain. I'm making stuff up.

You have better examples that happens where they'll see a financial statement and say what is this? What is this? Employee loan for example. No, we don't have any employee loans. There's an employee loan in every single financial statement that we've seen. What is this? You will probably alert it to the business team and you'll also want to alert it to me as counsel so that way I can look at the financial reps and just flag it if there's anything that I need to be mindful of. If there's post covenants with respect to taxes, how has this number implicated the finances for the company and how then is that going to affect you? Post close. I need to think about that. But then seller side, their counsel is going to reach out to us and probably say hey, you saw this or my client told me about this. This is why they did it this way. And it may not even be an employee loan. They probably just booked something broke. And now I need to go back to the purchase agreement and be mindful of they just did something wrong. Accounting wise, this is an issue, could potentially be a liability. How are we going to address this in the purchase agreement and all of this? I'm going to tell you in a.

Lot of emails you're Drafting the purchase agreement on the buy side.

Buy side. We give the first draft and then.

You got to go back and forth with all basically departments that are reporting these risks, and you really need the clarification from them directly. We always talk about who quarterbacked the deal. And I always thought as a person that runs a data room, it's actually.

You, so it actually is the person who runs the data room. So it's the most junior associate on the legal side at least, who's the most important quarterback. I can't make changes or revisions based off of facts and documents. If they don't flow that information up to me.

Ah, okay. So they technically quarterback it then. You're. What is your name?

I'm Pat Riley.

There you go. Okay.

Everything needs to go smoothly. I know what the GM wants. I know what owners want. I know what the players want and what the coach wants. How can we make this all work?

Okay, that's a lot to coordinate to make it happen. What are like, must have things on the diligence list to reduce risk.

It's understanding who owns whatever asset company. You'll be surprised how many times there's an issue with that. It could be a family trusts, for example. People pass away and then interest gets divided, et cetera. And sometimes things get messy or you have outstanding equity from some other series. So we need to figure out the universe of who the owners are. One, two. Can you even sell this thing? So that's the first bucket I need yes to those first two things before I even look at anything else. Because anything else comes back clear and you can't sell. It doesn't matter after that, it's the financial diligence, which our tax partner will deal with that. Then it's the contracts. So I need to be mindful of your business, what clients and customers you currently have, because there could be a contract that company is selling that you actually can't acquire because you may have a restrictive covenant in a current contract that would prohibit you from being in business with this other contract. So that needs to be taken care of as well.

That's the thing I got to learn because we built some functionality around contract analysis. I'm like, wow, every company. I never think about even our own company. There's so many customer contracts, there's so many employment contracts. Then literally everybody, every customer has a contract. Every vendor has a contract, Every employee has a contract. I'm like, that's a big chunk of diligence to go through contracts to go through that. When you start thinking about that. What are the ways you start thinking about risk and liabilities with all these different contracts? How do you prioritize?

Priority is actually with the structure. If it's an asset sale, I'm really going to look for the assignment clauses. If it's an equity sale, Change in control. This is actually something that first year associates learn. A clause that's assignment. And I would probably also have to be taught this. There's very specific terms where you may read a clause and think that's a change in control and it's not. It's actually just prohibits an actual transfer of the asset, not if the owners change. So there's that analysis. I also need to be mindful of any regulatory risks depending on the business that you're in. So I'm also going to target that and it also goes back to the loi of what are your key markers and what do you really need. So I'm also going to look at loss runs for policies. If we're talking about workforce and depending on again your business, let's say there are three key employees that you want. Right. And I'm going to also target for these three key employees, not just what are their salaries, et cetera. If I happen to notice that they have a workers comp claim that comes up every two or three years, I'm going to flag that for you. Like why do you actually want this guy? There's something that's popping up here. So everything is tailored. Like what I'm looking for in diligence is what the junior is looking for in diligence based on that structure. Yep.

So asset are looking for the assignments, equity stock purchase.

Yep.

Change of control, those other areas. So these are makes a lot of sense.

Yep.

Structure dictates like where you're going to start looking for risk in these contracts.

Yeah. And your obligations going forward. So in some of these customer contracts there may be warranties that you're making. Can you even fulfill those warranties? There may be indemnification obligations that you're going to be taking on. Is that a risk level that you're willing to take? There may also be insurance requirements in certain contracts that you may not have currently. So how are we going to deal with that?

That's a lot of stuff to get ready for this purchase agreement.

Yes. That's why there's like many drafts that go back and forth because we're dealing with the information that's coming up in real time. So at the first draft I may only have financial diligence for Example, and then I get customer agreements, vendor agreements, usually on a Friday night. And then I'm already thinking, okay, that needs to get changed. Now in the next draft of what's coming along, a good seller's counsel is going to make those changes with the documents that have been uploaded. But as buyer counsel you also want to track everything that's coming in. What's the potential clause that this is going to trigger?

What about the clauses that are more specific to post close or minimizing post close risk?

Those are heavily negotiated. So that's mainly working capital. Let's use working capital.

Working capital, exactly.

That's what, 90, 120 days afterwards. You have to be explicit in what's the timeframe to give the report. What are the calculations? Is there a dispute mechanism? Are you going to go to arbitration? Have you already picked an arbitrator in like a dispute resolution, like section end working capital? What are they looking for? If you're going to go with an independent accountant, for example, are they an independent finder of fact or are they just going to look at the purchase agreement? What are the definitions? Give me the numbers. That's it. So that's all of that mitigating, all of that risk and the fights and the liabilities that are going to happen down the line. It's a lot of upfront planning for structure of if this then that here's a resolution. Everyone's happy now, everyone just wants to get the deal closed. But we need to get into those details.

All the things that could go wrong.

Absolutely.

We spell them out. What does that look like in agreement? Is it specific section to list all those out disclosures or so usually it'll.

Follow whatever the issue is or whatever the topic is. So if it's working capital, it's probably a working capital mechanism. Dispute mechanism there. Indemnification is another one that's heavily fought. Let's say there's a claim that comes in afterwards, who's going to control that defense? Is it the indemnifying party or the indemnified party? Is that going to change anything? Do you get expenses advanced? Are there certain claims where you can get expenses advanced? Are there certain claims that are just barred? We also need to think about that and that'll pop up in its own section of the agreement. There may be other issues like escrow releases. If there's that 10% purchase price holdback, for example, that also needs to be set out in the escrow agreement of okay, are we going to do joint instruction or are we just going to do. Hey, here are the final calcs. Send it over to the escrow agent and they shoot it out. But again, you have to think about all of these things.

The good old indemnification clause.

I love it.

Disclosures. Is that part of.

Oh, yeah. Disclosure schedules is probably, I would say, the most negotiated bit.

Teach me this stuff. It comes up all the time and I don't really know the mechanics of it.

Disclosure schedules. The best way I can explain it, it's you're making a representation at a moment in time. So at closing, seller is going to represent to you that their tax returns are material in all respects. That as of this date, here are their top customers. That as of this date or between these dates that they haven't had any litigation, for example. But then let's say it's two or three months afterwards and then you get a claim, a litigation claim for something that happened during that time period that's a breach of that rep.

I want to tie the reps and warranty insurance on this because usually it's not like, I know we go to Canal street and you go buy the policy, but they do a bunch of diligence on their own. Maybe walk me through that process of how they actually build that policy out to tie together with ease purchase agreement.

Great example. I did buyer side rep and warranty insurance diligence. And it is. You want to talk about a detailed process, everything needs an answer and you're on a call. It's almost like a Senate hearing, quite frankly. You're on a call with the insurance company and they're gonna ask you questions like, why are we seeing this here? There's a potential for liability here. Are you sure that there isn't anything here? Or we notice this, we're gonna carve it out. And now maybe that's something that you actually wanted covered. So the thing about rep and warranty insurance, it actually changes how you address the actual rep and warranty section. So if you have rep and warranty insurance, you don't want to be too specific because if you're too specific, then it's carved out. If you're a seller, everything that you disclose on your disclosure schedules are carved out. So you want it to be as narrow as possible. As buyer, you also want it to be as narrow as possible because you want to be covered for as many claims as you possibly can. Right now, let's take the rope in warranty insurance out. And now it's just seller has to indemnify us if something happens. They want the broadest disclosure because they're going to say, no, I told you, no, that's done. And it changes the mechanics. Like that.

That's so interesting. I never thought about it that way.

That's why lawyers are here.

Yeah. I admit it. Lawyers do a good chunk of the work. Sometimes pretty much do like 80% of the work. In M and A deal, you guys.

Do all the hard work, you identify them, and we just have to make sure you guys get to the finish line.

Yeah. As a principal now, I was going to say as a banker back in the days, we take all the glory and fame and credit.

Yeah. I hesitate to do that. I wait until all the statute of limitations are done and the rep and warranty survival period's done before I start beating my chest and saying, yay, that deal closed, just to make sure everything's fine.

That's a good way to do it. You still go to the closing table, the closing party?

Yes, yes, we still do sometimes. Although with the pandemic, I missed out on a lot of the deal toys, a lot of the deal dinners, the $5,000 dinners, whatever. Occasionally, I'll be invited out, but I feel like I missed out on that really big era of closing dinners and toys and trinkets.

Yeah, that's true.

So let's bring that back, essentially.

I know. Do they cut it out? I feel like they. I haven't seen as many. I didn't look at your office. There's not where all the deal toys. Yeah, they're going to go to the banker's office. They always have a big showcase as soon as you walk in.

Honestly. That's right. Because every time I go to the bankers or like, we're on a webex call with them, I definitely see their deal toys. It's stopping there. We got to bring it back down to the lawyers.

Force majeure and contingency clauses. How are they evolving? How are they used?

Always evolving. The problem with force majeure, it tries to mitigate what it thinks it's going to see. So you think, hypothetically speaking, what could happen that's gonna stop this contract? That will stop me from performing.

Oh, a global pandemic.

But you're also at the mercy of the courts who will interpret this clause to say, is it pandemic? The same thing as an epidemic? The thing with force majeure and the legal doctrine is you have to be explicit in what it is that you're carving out. So force majeure is fighting this tension of. I want to Be as broad as possible. But legally I also need to be as specific as possible. But currently we have trade restrictions that may be coming up, so we'll have contingency that actually comes up with that where if post close there's something that happens. I'm going to speak very vaguely. There's an adjustment possibly to the purchase price. A lot of cybersecurity.

So that's different. So force majeure and contingencies that force majeure is like you can get out of the deal.

Yep.

If something happens.

Yep.

That's going to be in the purchase agreement and then it's. You're going to get out after you close.

After you close it. Potentially. Yeah. So it's supposed to be like a. If there's a deal, I'm trying to think of if there's a deal that you cannot complete, like you paid X amount of money for it to close and for some force majeure reason you cannot perform, the party should be able to say, I can't perform this. It's done. I typically don't see it in a lot of purchase agreements unless it's in a highly regulated or currently litigated sector. So you'll see a lot of cyber AI tech that usually comes up at that point.

And then the contingency clause, that's a little different because, hey, I can almost a little bit of a claw back on some of the terms if this variable occurs.

Correct. And. Or if sometimes as I'm sorry, I have to put my seller's counsel hat on. You don't want to deal with that. You just want to say, okay, what's the possible issue? So to give a concrete example, independent contractors, classifying them, that could change wages, finances, all of the financial flow of a company. Right. And there's also depending on what are the penalties, how far back do they go? Who owes the penalties? As seller, I would tell them, take X amount out of that purchase price, set it aside. How long do we think it's going to be able to resolve? Two years. Two years, that's all we're giving you. If anything pops up after two years, that's not our problem. But as buyer, I don't want that. I want a contingency clause that's going to stay as long as the statute of limitations allows me to keep it in place. Because if it's year three and I can still bring in a claim, you better believe I'm bringing in that claim.

Besides the table.

Yeah.

You ever feel you're developing a Jekyll and Hyde Personas. When you sort of see it on both sides and you're like, yeah, yeah.

That'S the mock trial in me. And if there are any astrology people, I'd say that's also my Libra moon. Being able to just see both sides, it's exhausting.

How can teams prevent conflicting clauses and deals with multiple agreements? What does that mean, actually? What's that question?

So this is a very important topic. When you deal with rollover equity, for.

Example, you'd have like an agreement on the rule over equity. Let me frame it a little different. In deals that have multiple agreements, conflicts can come up. You have examples or how do you address those things?

You have to create a hierarchy of documents. Who's going to talk about some main provisions, dispute resolution, indemnification, governing law. That's probably going to go in the purchase agreement. In the other agreements, employment agreements or anything else, you're going to refer back to the purchase agreement. That's the simplest way to do it, but not everyone does it that way. And there are other terms that need to be adjusted in an employment agreement, indemnification, if it comes up, it's going to be tweaked specifically for that. The issue that tends to come up is with rollover equity, because you have these documents that they're not going to change them for a specific. As buyer counsel, I'm not going to have 10 different equity documents that I need to track. There's going to be one. And you need to figure out how to fit into this one document. Now, buyer's counsel, I'm trying to figure out how to bring that document into every transaction. And there may be conflicting terms. So let's say an employee, a key employee, has rollover equity. There's a clause for termination for cause he gets terminated for cause that then ties usually to rollover equity. Rollover equity may have some notice provision of triggering default, whatever we need to make sure. Is there a notice provision in the employment agreement? Is there a notice provision in the equity docs? There's actually an example where it was the reverse. The key employee wanted to leave and they had an agreement in their employment of this is how you need to leave. Here's a calculation, notice provisions, et cetera, up to the point of it needs to be FedEx mailed, blah, blah, blah, blah. Now, as lawyers, we also have to look at the actual governing documents. So that's the operating agreement or whatever. And it will have its own set of rules. If the lawyer who negotiated was really on Their stuff. They're going to say that the employment agreement supersedes any conflicting terms in that LLC agreement. So if that LLC agreement, I'm just going to say LLC has a conflicting term, we're not going to go by it, because then if we breach something, because now we don't know which one to follow, that's going to mess up my client even more. Then you run into, we need to draft a letter, get them to release and waive that if we do it this way, it's not a breach and that we're not in default, and that they then can't take X amount of money out of the purchase agreement because of whatever, they can't touch escrow. Everything plays together, and you have to be mindful of that.

So if both agreements say that our agreement supersedes everything else, then you still got this case. You got to negotiate it.

That's when you pick up the phone and you call the other counsel and say, hey, we both know that we negotiated this. That's your equity doc. This should probably be the one that actually governs. What's your risk for me not following that. That's the question.

Common sense.

Yeah. Which that's. Sometimes it's hard to come by in deals.

You got to go meet for a beer and hash it out.

Yeah, exactly.

So we have examples of the multiple agreements, which is a whole other dynamic. I'm thinking back to just things that pop up after the deal.

A lot of it centers around rip and warranty or financial covenants. Earn outs are always. That's the big one.

Earn outs and then equity agreements with employees. The jurisdiction and governance part of it that I was curious about because, like, we're looking at a company out of the country. When wire comes to all this stuff that we're negotiating, we just talked about a lot.

Yeah.

What jurisdiction do you end up with? Because I obviously want it here in the US they're going to want it in their domicile.

My hat on right now is as your counsel, as buyer. They're coming here.

They're coming here.

Yeah, they're coming here. That's where we're going to start. And if there's a reasoned argument as to why they can't. For example, let's say that they're in some remote country. I don't know, travel restrictions, for example, that could also be a thing that you do.

Is that common?

No. A lot of times in the US it's always Delaware.

Yeah. Yeah. The US Is simple. As a buyer, I feel like I'm the one taking the risk. But the seller is like, well, it's my house now.

I'm going to Jekyll and Hyde it as seller's counsel. I'm going to say, if you're coming to me and telling me that I have an issue, the least you could do is come to my backyard so that I could have my resources and let's hash this out. If you have an issue, come here, let's hash it out. Don't also give me the expense to then come to Arkansas, which has come.

Up sometimes, Random States International Arbitration Court in the Bahamas.

Okay, so who's paying the flights over Zoom? So it could also be a thing like that. Or sometimes you have to figure out how to make it equal for both sides. So let's say you really want to do commercial arbitration in Bahamas for some reason, seller is like, absolutely not. I'm not going to do that. They might say, let's do a prevailing party cost like type of thing where if I come down there, you're not only paying me what the judgment is, you're also paying my airfare. That could be something that's negotiated or you could say upfront, hey, I know that this is a crazy request to you, but it's really important to me. If something happens like I'm going to pay upfront the expense for one person. Now see, when you start making offers like this, you have to be specific, one person, comfort plus, not first class things like that. What are you willing to give to get that thing that you really want?

It's a lot to negotiations, honestly, it.

Sounds like a lot. But when we really speak with clients, we figure out there's usually like three key core things where I know that at the end of the day I can't deviate from these three things. And then there are other things that you may be willing to move the goalposts a little bit. I might use that in order to get you your hard three. We'll talk about it. And it may seem like a lot like in that scenario, the comfort plus whatever Bahamas thing. But is it more important to you, the Bahamas versus the indemnification survival period? And if the conversation that we had is the survival period, I'm going to tell you, give up the Bahamas and we're going to fight for a longer survival period because that's what you actually want at the end of the day.

Sounds like a guidance going back to the earnouts and just equity agreements. What are the things that come up or the risks post close on those I hear about all the time. I hear especially earnouts. So often they end up in litigation. They didn't put the right things on it. Or integration sort of skews things. Somebody gets pissed off and lawsuits get.

Filed, then goes to litigation. But it's funny because we get looped back in because the litigators then ask us to translate the documents for them. What is this? What's ebitda? And we have to now explain that per the agreement, they were supposed to do this and they actually did this. So the thing about mitigating risks with respect to earn out, it's again being really specific at the start. How are we calculating it? What is the actual metric that we are looking at? I mentioned a little bit earlier, but profitability, top three customers, if that's what we're actually looking for. Who controls during the earnout period? How long is the earn out period? Seller is going to want as much control over that. But as buyer, this is your business now. You want to take control of it. But you also want to be mindful of. You don't want to make expenditures that are going to screw the earn out over because you also want to keep that relationship going great or going well at least because they're probably employed with you. The key principle. And you want to keep everyone happy as much as you can. Another thing about risks mitigating in earnouts, you can't go all or nothing. A sliding scale is your best friend and it makes it a lot more palatable to you know, I missed the top metric by $500,000, but I'm still going to get X amount of money. Dang. Even though I didn't max out my earn out, I still walked away with some cash. All or nothing is where it really gets nasty. And they're going to look at every single dollar that was spent to say you did X, Y and Z to make Me miss that 500k.

Kind of like bouncing between doing earnouts and seller financing. Earnouts are typically paid out annually. X amount of years. It seems like a typical term, right?

One year, two years. Yeah. It's usually tied with employment.

And it's like a chunk at the end of the year basically versus seller financing. It's like a loan term. I'm going to pay you monthly with this much interest. Part of me is it makes sense. But then the other part's like, well, I can buy more time if I just got to wait to pay the chunk out. Yeah.

I think with the seller note also is, do you have any other debt how does it play in your financing universe Now? I'm putting my seller hat on. I don't want a seller note because if you are a private equity fund, you probably have other debt. My debt's going to be subordinated. I'm going to be last in line. That's money I'm probably not going to get.

Something goes wrong. Yeah, you got a chance of not getting that money.

Yeah. But as buyer, of course I'm going to want that. You're giving me a seller note. How sweet of you. How kind. But I got maybe three other lenders that need to get past you first. And it takes me a little bit more time to pay X amount.

If I don't have any other lenders, I can almost let you know. Like you'd have first lien, basically.

Exactly. And that'll make it much more attractive. And then based on your cash flow, you can figure out how long you kind of need for the seller note. A good seller is going to probably ask for a guarantee. Seller notes can be used well, but it can get a little dicey. And also remember, that relationship is now being prolonged even further. Employment agreements are now what, two, three years or five? Maybe a seller note can go even longer than that.

What are terms you typically see on seller note?

I've seen five years. Yeah. Five years is. Yeah, it's probably your standard. You could push to seven. A lot of the sellers that we represent, they built this business, they're selling it and they want to retire in two years.

They get annuity out of it.

Yeah. Also because of that, we need to be really mindful of making sure that back end money is available.

Makes total sense. Anything around the employment equity agreements that pops back up, I guess it's more around what we talked about earlier. Somebody gets laid off. What were the terms around that?

Yeah. If someone gets terminated for cause, if the other party wants to terminate for they just want to terminate. What are the implications for that? There's a lot of negotiations with perks, especially with sellers or key employees. As a buyer, you may say, hey, in our company we have X amount of holidays, et cetera. And I need to keep it uniform. So no, you can't have 40 days off. I also need you here. That's more cultural risk and employment agreement risk, that kind of ties hand in hand. And the employment agreement risk, along with the equity risk that we touched a little bit earlier is what happens when this relationship ends. Do they keep their equity in the company? Can they be redeemed? Do they have to force you buyer to pay it back or to buy those shares back and what's the valuation at that point? And again, that's something that we need to talk about now and not later.

Covered a lot. I liked how we went back and forth both sides of the table. Jekyll Hyde, if we were going back and putting more of that seller cap on, what are some of the key things that you would highlight in terms of things that you would really hone in on? If I was going to sell a business and I'm creating a scenario here, we had big corporation that wants to acquire us, which is like flattered. The big check in front of us, hey, we're going to give you this amount. It's like, whoa, hard to say no to that. What are some of those things? Because I could see that you're getting glossy eyed over just getting the check but then all of a sudden it's tied to this herd now. Tied to this, this. It's like you're actually only getting this little check at closing. And I'm like, well, what the fuck?

Putting the seller hat on at the beginning. We often just tell them, please don't give up. Especially at the end. Deal fatigue is a real thing.

That's a big thing that does not get talked about. When you sell a business. Oh, wow.

Yeah, yeah. You are exhausted. You've been pouring through diligence. You've been negotiating the business teams, you've been paying your legal team and the closings that in sight. You start feeling like, is this ever going to happen? My wife wants a vacation, you know, like I need this to close.

We should start like a therapy consulting company just for that.

Yeah.

People going through the sell side process because it is. You're paying all this money out and sometimes, you know, bankers are going to want you to do like a seller Q of E. You're just like, you got them on retainer. You're just like paying a lot of money out. And then the fact is the buyer's got a whole army of people running doing diligence and it's just you and the CFO and maybe one or two other people.

Yeah.

It's intense.

Yeah. Or asking for a document that you're like, what is that? I don't even know what you're asking me for. Or audited financials. I didn't audit my finances. More smaller mom and pop companies kind of things like that. But I would advise the one thing is that deal fatigue is to just be mindful of that diligence. It's Going to piss you off when.

You get involved on the sell side. If I got the company approached, we got an NDA. All of a sudden, they got this loi they sent. I call you and say, hey, got this loi. We should review it together. Or do I just sign it, then call you?

So what should they do versus what they actually do? They should call us once they get the loi not signed because we can still negotiate certain things at that point for you and already set the table of this is not going to be a walk in the park. I don't care how big the check is. I understand you guys want X, Y and Z, but we need to protect our client. An loi that comes already signed, our hands are kind of tied. And at that point, again, we're going to ask for that second NDA to make sure if they get any confidential information from you and this deal does not close that they cannot use it. I cannot tell you recently how many times it's happened. A buyer has contacted a customer or a vendor before the deal closed, before the seller even told the network that they're planning on selling, and it ruins everything.

That's something I would do. I would like, hey, I want to do some customer diligence. I want to know like how happy of a customer they are, how likely they are to stay.

So you can do that, but you have to do it with seller's consent. You can.

Okay, I got to let you know, but the seller is probably going to be like, no way, dude.

No, the sellers, I mean, they will figure out a way like, this is your first opportunity to work really together, business wise. How are we going to approach this? You're probably going to have to make it nice and sweet of, hey, you're going to be working with me now. It's a good thing. And then seller is going to emphasize, we've had a great relationship, trust this guy. Probably also going to work a little bit for this guy. So we're not going to be completely detached. So you want to actually communicate with.

Seller and then you may even find a third party that does a lot of this stuff these days. Cool. So we got that, got there. Our second NDA as a seller, we talked a lot of the counterpoints that the buyers present that you have to represent. Hey, protect the seller's interest. Any other key things that are unique outside of what we just discussed.

The diligence process, I would say is different between buyer and sell side. Buyer diligence, like you mentioned, we're going to be communicating I'm communicating with your business team. I need to have a more aggressive, I would probably say analytical view of the diligence and how it works with your business and the purchase agreement. As seller, we're being responsive to you. So you're okay, you asked me for this, I'll give you that. If you don't ask that follow up question, I'm not going to give you the answer and that's that. So that's the difference already in the diligence. The problem is sometimes sellers just don't want to give any diligence or they just don't have it. You have to then figure out how can I get a responsive answer to this? So you'll have to have narratives or you'll have to have, for example, sometimes they don't have customer agreements, so they'll just have purchase orders or something or a handshake. And I need to figure out how long has this handshake been going on? How often do you pay this person? What exactly do they do? So we have to figure out that on seller side diligence as well. I need to understand how your business operates completely buyer side. I need to understand how your business is going to operate in mine. If I'm sell side, I don't really care about how it's going to operate in yours. You need to figure that out. I need to figure out how this thing operates to get it legally ready to sell.

Represents seller's interest. Yeah, those are the main things. We talked through a lot of the other clauses that come up and they ultimately just get negotiated.

Yeah. A seller's counsel. We can go a little bit more working capital adjustment, for example. Yeah, I'm going to fight a seller's council. That the way how we have done the accounting is the way it's going to be done at that point. It's the way how an earn out is going to be calculated. I need all the numbers to match the same calculations because we can't do working capital this way.

That's how we do it.

You can't do the earn out the way how you calculate things.

We're a big corporation and we know better. We follow all the GAAP accounting rules, unlike you.

But then we're comparing apples and oranges and it's not an accurate representation.

That's why you got to listen to.

What we tell you because you're not actually. We're not going to get the full, full actual picture and we don't know how it's going to swing. So you may Actually want it to be the way how I've been accounting.

What's market?

Depends.

This is a really interesting thing because I feel like it depends because what's based on. Is it like a LexisNexis database that we say, okay, according to LexisNexis, this is market or hey, we've done this a million times and this is market. What is market?

So you can find market. And it's great that you asked that because as a. It was a third year associate asked myself how do I figure out what's market? People are talking about market trends. How do I keep track of this? Do I look at like Bloomberg or things like that? There are databases online where you could look at trends where caps are going up to X amount, holdbacks are going up to X amount, for example. However, you don't want to just go off of external numbers though. They can be guideposts. I'm really big on data. I am probably one of the rare attorneys. Even though we exist, I love Excel. So I have my own personal tracker of deal sizes and different percentages. And like how did we negotiate reps and warranties? How did we negotiate survival periods if we have rep and warranty insurance, did we change anything else that maybe in another deal we wouldn't have deviated? Market. It depends. Depends on. In the business sector, it depends on the size of the deal. Right. Because some deals I've actually seen escrows go up to 20%, 30%. But again it depends on the size of the deal.

Used any AI on deals you've worked on?

So I have not personally.

I was going to ask is AI going to figure out what's market?

Here's the thing about AI. What is the data set? It's passed. It's relying on that. If no one's going to update that knowledge bank, AI is not going to know what's market either. AI is going to know market at a certain time based off of whatever the model learned at that point. And things can shift and maybe the model doesn't update.

Next thing you know somebody's going to market it though, is that we keep our model updated. As soon as like deals close, somehow we get that info and update or.

I mean I think you've just thought about something with Sec Edgar. If you keep a tracker on that.

Yeah. Because it is all public on those agreements.

Yep, yep.

Would you correlate it to private? Because again, like those little deals, all these things are very different.

You could probably find certain terms.

Certain terms.

Yeah. That you could match With. But yeah, no, because sometimes with those public deals, it's just the disclosures and the like, financial requirements, reporting requirements, regulatory compliance, that changes. Maybe they'll have an extra escrow for that and you don't have to account for that. So then you'll be like, okay, in my agreement, I don't have to take care of that. But at the baseline, what was the purchase price, what were the percentages? Did they get rep and warranty insurance, et cetera?

Yeah, to be continued. So we'll see what happens. The contract analysis is the other big one that we're seeing bubble up more. So generative AI has really made that effective. I got personally involved in developing that last year and I don't. Do you see that sort of coming in the field?

And I've seen it come in the field in the sense of a lot of panels talking about how AI is going to get rid of junior associates.

You'Re going to get rid of the first and second year.

I just don't buy that.

Because then you'll be able to. Because there won't be any crop of future attorneys, but you'll be able to keep increasing your fees infinitely to paying like 50,000 plus an hour.

I'd like to retire at some point.

That'll be it. You just wake up, do an hour of work and you're good for the month.

With AI in particular and contract analysis, it's good for those specific targets of change in control or assignments, insurance requirements, things like that. Very targeted. But let's go back to the mock trial analysis of understanding the entire universe of the deal. AI struggles with contextualizing some of the nuances of some of these contracts and how they play a role with the acquisition or the sale. And that's where things get a little bit dicey and that you need that human touch of okay, yeah, this contract has a change in control provision. Yeah, we need to flag it. But there may be other things in the agreement that's implicating an indemnification obligation or something. It can help. I think it's a good compliment. I don't think it's a replacement.

Other thing with AI, I was thinking of just the regulations around AI. I feel like it's still pretty undefined and they're starting to define it. Especially like in Europe. We didn't talk about the regulation changes in general, but how do you sort of address that when you're thinking about the risks that come about, potential changes in regulation, potential changes with just the way you reference AI usage?

So that's contingency clauses.

Okay. So we fit that in the contingency clause we talked about.

Yep. And survival periods for indemnification if something changes.

Okay, so we talk through AI, we talk through managing the risk, managing just the contract analysis. That's going to be interesting just to see what happens because things are changing pretty quick.

The way for AI, at least the way how I envision it. I know that there are some attorneys who are just anti AI, but hey, I have ChatGPT on my iPad.

I was going to say you got to be using it personally. Everybody is. I saw my 11 year old son using it to do his homework.

To do homework.

Taking his picture and put it in chat. It gives an answer.

Oh no.

I had such a confused moment because I didn't know to be mad or proud of him is both at the same time.

Yeah, it's really efficient. But you're missing the point.

Maybe you're onto something. Maybe you should just learn how to use AI better than everybody else and you'll be better off that way.

There's this weird adjustment period of figuring how AI is in our lives because it can do so much that it's overbearing. It's like, well, what can I do then as a human? But then the more we use AI, the hallucinations, for example, it's like, wait, what's this? We're figuring out that there are limitations to it. Once we get some more of those regulations, more of the tech actually behind it, then we'll be able to figure it out. How does this actually fit into my life travel itineraries? 10 out of 10.

I agree. I love doing road trips and especially we're into like just giving the unique stops in between these cities.

Yeah. Yeah. I recently did it because we're. I'm my best friend and I were going to do a quick little trip in Europe and I said, here are the main cities, here are our main interests. I want cost efficient and I want fun. Give me an itinerary. And it gave me the best itinerary that I could not have come up with. Yeah, AI has its place in M and A for sure. We just need to figure out what it is. And there's also confidentiality is the name of the game.

Yeah. We're going to get to a point where we actually trust it. But it seems like we are in the big hype cycle. When the dust settles, there is going to be some significant changes in players that stand out.

Yeah. And sometimes you just need to run that specific Analysis of. Give me all of the contracts. For example, I need every single contract. That buyer in the future will have an obligation to spend more than $10,000 or something. You give AI that prompt. You give it the universe of contracts. It's going to shoot it out. But also you have to be very specific because AI may be like, there's an insurance requirement that's going to require X amount, so that'll get it above the 10k. And you're like, no, I just want it under this contract. So there may be some refining, but if very specified tasks, probably material contracts, that's where I'm seeing it, like, really pop up.

You want to come test our contract analysis?

AI 1000%.

Let's do it. Tina, I gotta ask, what's the craziest thing you've seen in M and A?

I tried to think about, like, clients, and I'm like, nothing's really popping up. And also, out of the sake of confidentiality, whatever. But the craziest thing is always the attorneys on the other side who don't want to negotiate. We'll be on a call. Yeah, yeah, yeah, yeah, we'll do that. Yeah. We send the purchase agreement over with the things that we talked about, and they all get rejected. And it's like we just said on a call that that was okay.

Yeah.

I've had a deal before where I don't know if the attorney wasn't talking to the client, like their own client, but their client was talking to our client and funneling terms up to us. And we're like, are you sure? And then they're telling us, no, that's the deal. And then we go back to opposing counsel, and they're like, that's not the deal. We're like, wait, wait. Who lied to who? And now we're trying to figure out what's going on. And that's when you get the 15 people on a call. Legal's on finances, on business teams, on just so that we hash out what's the actual deal point.

That is wild. I've heard variations of that happen quite often. I know. You give me an example. I'm pushing for crazier.

There's also cash sweeps where you try to explain equity sale. You're not selling cash. Accountants, attorneys sometimes struggle with understanding working capital and the fact that you're not actually leaving cash. Right. It's accounts receivable, accounts payable. It needs to. Things need to balance out. And then you will do a cash sweep. But sometimes. Not sometimes, but there was a scenario where someone swept twice and so now they owed the other party X amount of money. And it became this whole litigation thing where it was like you knew you weren't supposed to take that money. What do you mean you didn't know that you were supposed to take that money?

Oh, getting greedy in the wire.

Oh, yeah, that. Buying a business but not having the requisite permit to actually conduct the business. And then the person that has the permit wants to retire. What do you do then? Did you not do your diligence before? But yeah, there's that. I can share with you my craziest closing story. This was actually the rep and warranty insurance deal by side. And there's a certain point in a deal where it does not matter how thorough your memo is, you can't step away because you have so much knowledge with respect to this deal that you can't have someone kind of like step in if you need to go away for a vacation or something. I had a wedding in Mexico City that I just could not, I couldn't miss. The closing kept getting pushed back and pushed back. And I'm looking at the calendar and I'm like, this is going to hit in Mexico City. I just, I know it. Of course. It's the third dam in Mexico City. We have to close the deal now. I'm on my way to the Pyramids, a UNESCO world site. And I'm in the back of an Uber on a Mexican highway closing a deal. And I like, I just, I have a picture of me like with my laptop in the Uber and I just remembered closing the deal, releasing the signatures, the wires get funded. And my boss was like, please drink all the tequila for me because it was a long deal. I'm looking at the pyramids. Not the pyramids, the temples. And I'm like, I bet you they were not thinking that someone's gonna be here that just closed an M and a deal with a laptop in the back. Like, you know, and just doing some follow up post closing. Let's make sure we send the closing binder, stuff like that. But yeah, that's the craziest one. The back of an Uber on a.

Mexican highway and it's transport right into ancient history.

Of course. Yeah, yeah, it gave me a really nice perspective on life.

Tina, this has been an awesome conversation. I really enjoyed it. You've helped me become a better M and a scientist.

Oh, I appreciate that. You've helped me as well. I shared this with you when we first connected. I heard about your podcast on the Netflix show Partner track. And that was also at the time where I was looking like what's market? I don't know what these things are. And you had a bunch of these senior practitioners and even still now speaking about these topics and I'm like, wait, I don't know what that is. And wow, years later, look at me now.

I love that. Came full circle. For those of you who don't know, we had a cameo in a Netflix series called Partner Track, which is like a rom com that takes an M and a law firm. Highly recommend checking out episode one and pay attention. 20 minutes in the first episode, we're plugged in there nicely and then from that we've had a lot of attorneys. I've noticed. I was like, well, I got to make a point to interview attorneys. And full circle you found the podcast interview is a phenomenal interview and you're recognized recently as one of the up and coming rising stars for NYC attorneys. So really honored to make this happen. Those of you that have listened this far, I love you, fellow M and a scientist. Hit me up. Tell me what you thought about this interview. That's where I get feedback to get ideas to do these podcasts. Give me a sense of what topics to cover things like that or give me criticism. I don't mind. I'll take it. That's how I'm going to get better at doing this. Reach out to me on LinkedIn. Love hearing from folks that listen to the podcast. Till next time, here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M and A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.