As a middle-market aerospace and defense company owner, you own all of the risks associated with your business. If there is a claim against you for any reason, whether legitimate or frivolous, you ultimately will pay the price of defending against that claim. While you may have insurance, which can help reimburse you and/or pay for legal defense costs, ultimately you own any risks associated with your business.
Examples of these claims include but are not limited to disputes with fellow shareholders, disputes with creditors, disputes with customers, disputes with suppliers, environmental spills, regulatory compliance, or cyber-attacks leading to corruption, theft, or loss of access to your company’s data.
When you sell your business, ownership of the ‘risks prior to the time of sale’ needs to be addressed. Whether you are selling your business through a stock sale, a sale of membership interests, or an asset sale, the ‘risk prior to the time of the sale’ needs to be addressed and documented in the purchase agreement with the acquirer of your business. For example, what if there is an employee action for a claimed event that took place prior to the sale? Who is responsible for defending and or paying against that claim? Is it the new owner? Is it you? Or is it a shared obligation? What if there is a product liability claim after the sale? What if the product liability claim alleges the event causing the claim took place during your ownership, prior to the time of the sale? These are just a few of hundreds of possible scenarios that we have seen that may need to be addressed between you and the buyer or your business.
While your legal counsel will take the lead in helping you address the legal issues relating to the above, we can advise you on the negotiating tactics that you should consider early in the sale process, to give you the greatest possible advantages in negotiating ‘who will own the post-closing risks.’ With 23 years of experience negotiating the sale of middle-market aerospace and defense companies, we have developed tactics that have been proven to be highly successful in helping our clients minimize their post-closing risks.
Have a great day everyone!
Bill Alderman
Founding Partner
