Dealership Closings Don't Need To Be An All-Day Affair
The buy/sell closing is the culmination of months of hard work by buyers, sellers, and the parties representing them. Buyers and sellers expend significant "sweat equity" negotiating these deals, and considerable sums on fees for accountants, attorneys, and brokers. Attorneys spend hours drafting and negotiating asset purchase agreements, real property purchase contracts or leases, and ancillary agreements such as assignments and assumptions of contracts. Accountants spend a considerable amount of time performing due diligence and reconciling accounts prior to closing.
Abraham Lincoln famously said "give me six hours to chop down a tree and I will spend the first four sharpening the axe." His prescient advice is equally applicable to preparation for the closing. Preparation is where experienced counsel saves clients time and money.
If you are the buyer or seller, it is up to you to hold your attorneys accountable for making the closing as speedy and smooth as possible by preparing for it as well as possible. A closing needn't be an all-day affair if counsel prepares well and takes charge of coordinating the closing. So don't be offended if your attorney seems to be fixated on preparation.
One example is the vehicle inventory check. Banks often schedule the check for the day of closing. If parties wait until the day of closing for the inventory check, then hours will be wasted reconciling any issues uncovered, and making the necessary adjustments. Moreover, issues can arise if the bank discovers problems like damaged vehicles or vehicles that the seller reported sold but remain on the floorplan line.
Experienced counsel advise their clients to perform the check in advance of the closing. That way the parties will have the inventory and can reconcile this information with the requirements in the asset purchase agreement governing vehicle purchases, such as adjustments and credits the buyer is entitled to receive, and any vehicles that the buyer will not purchase in accordance with the agreement.
Review, review, review
Your attorney should thoroughly review and, if they only require one party's signature, execute any documents required by the asset purchase agreement. Even if the attorney has discussed the documents, such as the lease, with you many times, he or she should review them with you again before the closing to ensure you agree with the terms and conditions.
The parties' accountants should meet well in advance to discuss the schedules and any adjustments, and, on the day of closing, should be immediately available to help reconcile the accounts and complete the closing statement. Identifying any issues in advance of the closing allows the parties to reconcile them promptly.
All of this preparation is for naught if the attorneys do not take leading roles in establishing and coordinating the game plan for a successful closing. Much like the quarterback of a football team, the attorney is responsible for implementing a plan to win the game. Here, the prize is a quick and seamless closing.
Ultimately, the clients suffer from the lack of preparation. Each attorney must corral their respective parties and clearly establish timelines and goals for completing preparatory work. Schedules must be completed and available for review by a certain date. Outstanding issues must be identified and delegated to the stakeholder best suited to resolving them. Hold parties accountable who do not comply with the plan and explain the repercussions clearly to the client.
At the closing, some attorneys forget that it is the "big game," and turn over their roles as quarterback to the buyer, the seller, or the accountants. That is a mistake. The buy/sell is a major transaction for the clients and they look to their attorneys for guidance, and assurance that their sizeable investment is protected.
As well, the attorneys are the parties most familiar with the terms and supporting documents of the transaction. If the attorneys effectively spent their time preparing for the closing, they are the ones best suited to orchestrate the closing and move it along.
As buy/sell activity increases, it is likely that the volume of buy/sell work attorneys handle will increase. Attorneys can plan accordingly by fine tuning their approach on how they prepare for the closing. And you, the client will be thankful that you retained experience counsel that coordinated an issue-free closing that took a few hours instead of an entire day.
Leonard Bellavia is a senior partner with Bellavia Blatt & Crossett PC, with offices in New York, New Jersey, and Connecticut. He can be reached at 1-516-873-3000 or firstname.lastname@example.org.