As much as sellers would like to believe the closing of a transaction signals the end of uncertainty and risk, the unfortunate truth is significant exposure to legal liability can arise if transaction details and follow up activities are not properly addressed. Here are a few of the most common:
- Obsolete and/or excess inventory neither adequately reserved nor properly accounted.
- Accounts receivables not netted for customer rebates and credits.
- Customer disputes and warranty claims not fully reserved or disclosed.
- Accrued compensation and time off not accurately recorded.
- Potential environmental events not fully revealed.
- Threatened litigation not divulged.
The most effective approach to handling issues like these is to properly prepare well before closing, with support from your professionals (accountants, legal counsel, and M&A bankers).
As you have heard us say many times, the key to a successful process of selling a middle market aerospace and defense company is preparation. This is also true when it comes to Post-Closing legal exposure; planning, transparency and disclosure are paramount to avoid later litigation.
Have a great day everyone.
Managing Director, Aerospace