Am I the only one who thinks deal costs should be low?
March 30, 2024
by a professional from West Chester University of Pennsylvania in Cochranville, PA 19330, USA
I've read through a bunch of posts on this site, and I'm really surprised by how much people are willing to spend. Yes, I have a background and expertise in accounting, which helps, but it seems people are going overboard and I'd like to understand why.
For example, thousands in legal fees, $5K+ on QoE analysis, various boot camps and educational resources, etc.
My story is that I purchased 3 accounting firms in NC for $2M in 8 months. I would estimate my total costs (excluding equity injections) were $1-2k, most of that being travel.
I found a good starting LOI, purchase agreement, and lease agreement online. Then, with Chat GPT and custom editing, they were of professional quality, maintaining common folk language. For each deal, the seller had a good attorney who would do a lot of the heavy listing. I would just ensure the agreements reflected what we both wanted out of the deal.
I listened to every podcast around ETA, read all the books, and did a lot of self-research to ensure I wouldn't make any obvious mistakes.
Now that I'm well through deal closure, everything has worked out beautifully.
What are your thoughts?
from University of Toronto in Toronto, ON, Canada
Most other buyers/searchers are doing this for the first time, don't understand the rules of the acquisition game, don't have any legal knowledge and don't know how to do due diligence or QoE work. As a result, they are entirely reliant on professional advisors to take care of those functions and to protect them in the acquisition process. Fees are high because you get what you pay for in professional advisory work, one of the major benefits being that professional advisors have a professional duty and/or a common law fiduciary duty to act only in their clients' best interests and to thereby protect their clients. That's why fees are high: they're essentially an insurance premium, if your professional advisor makes a mess of it then you can sue him and his professional liability insurance will compensate you.
On a closing note, with the advantage of 40 years and 80 deals totalling more than $2 Billion of acquisition experience, I would respectfully caution you that your approach of using ChatGPT and seller's legal counsel to prepare the acquisition documentation on which you rely to assume significant obligations that may materially negatively impact your financial position and your family's lifestyle, is an ill-considered and very high-risk approach to ETA. Seller's counsel has both a professional and contractual obligation to the seller, and none to you. ChatGPT has no obligation whatsoever; it's just a stupid piece of software. So, when the seller's counsel inserts a few small and seemingly - but not really - innocuous phrases in the documentation that swing the deal in favour of the seller and against you, you'll never notice. In other words, it's all OK until it's not - and then you're screwed. You're playing in the big leagues now and you need to do better; your wife and your family deserve it.
^redacted, might I suggest that you create a category for "transaction costs" or "deal costs" to keep track of these kinds of dialogues? They're important.
from University of Michigan in Detroit, MI, USA