Selling a Business: Seller Remorse Pt 2

Two weeks ago, in a post about seller remorse, I mentioned that we were involved in a deal that had begun to appear as if the seller may have gotten cold feet – roughly two weeks before the deal was scheduled to close! The buyer had spent many weeks doing its due diligence, drawing up plans to jump into the business and lining up its financing. The lender was committed and everything seemed to be sailing toward a smooth closing. So what happened since then? Two seller decisions – major components of the deal about which I’ve written often in the past – began to unfavorably impact the likelihood of the closing ever happening. By themselves, either could have derailed the deal. Together, it looked like the Titanic hitting the iceberg.

Representation Problem #1

As it turns out, the seller’s lawyer thought that our client was getting too good a deal – that the price was now too low – and began trying to derail the sale. His comments and advice to the seller began to ratchet up the seller remorse. On behalf of our client, we finally had to advise the seller – through his lawyer and his real estate agent who still hadn’t been heard from – that, if the seller didn’t remove the obstacles raised by the attorney by 5 PM on such-and-such a date, our client would file a claim (known as a “Lis Pendens“) against the property that was included in the sale, as well as claims for damages and specific performance. When the seller heard what the potential damages could be – AND his lawyer’s required retainer to defend him against our client’s claims – he realized that he would be foolish to let this deal collapse only to end up in court with his business tied up for the next 18 months. Sure enough, three days later, a new document, affirming the terms and conditions of the purchase contract and amendments, was executed by the parties. The level of seller remorse was now pretty substantial – and a sad sight it was. But just when we thought this tug of war was over, the seller’s attorney let loose with a couple of additional literary hand grenades in our direction. But they were all just so much smoke which we’ve politely responded to reminding him that our client is planning to close as scheduled. But it ain’t over yet, campers!