When the Deal is Done
Some people might say that the deal is done when the “Fat Lady Sings,” and others would say its complete when the check clears the bank. I adhere to the latter. I was recently reminded of a closing that took place in New York City between a strategic buyer and a company that I was the CFO. The deal was to sell the company’s assets and the building that the company occupied, which was owned by the majority shareholder. Both parties were in full agreement to all of the terms and the sellers were already planning on what they were going to do with the funds that they were to receive, an amount in excess of $10mm. All of the checks and wire transfers were in place and it was just a matter of signing the agreements. At the time of signing, a senior attorney for the buyer asked a junior associate if the title to the building had been reviewed and accepted. The junior associate said it had but he had one small question that he needed to have answered by the sellers. “Was the weathervane still attached to the roof of the building?”
The majority shareholder’s eyes bulged and he responded that the weathervane had been stolen some number of years ago. A codicil had been added to the title in the late 1800’s that stated “if the weathervane was not kept on top of the building, the property reverted back to the prior owner.” The building was an old textile mill in southern New Hampshire. As you can imagine, all parties were somewhat aghast and looked at the senior attorney for some kind of direction. The attorney adjourned the meeting until the next day so that research could be done on this matter. It took a few more days to determine what needed to be done and it was determined that the sellers would have to agree to replicate the weathervane at a cost of $50,000 before the deal could be completed.
As you can imagine, emotions were running high and there was a lot of anxiety on both parties. The moral of the story is that something might go wrong before the deal is completed, and it usually does. “Don’t count your chickens before they hatch.” Wait for the funds to clear the bank. If you want to chat, give me a call at 201-523-6326 or email me at firstname.lastname@example.org.