The DOs and DON'Ts of the LOI

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All right, welcome everyone to this office hours on all the legal aspects of buying a business. My name is Will Smith, and I'm the host of the podcast Acquiring Minds, where you probably heard about this event. Attorneys James David Williams and Bill Barlo are going to host this session. James David and Bill are partners of Barlo and Williams, a practice that specializes in small business acquisitions. So they see tons of deals. They're at the front lines, really, of the market, and their focus is helping Searchers like you all execute deals while, of course, protecting your downside. They also see, they also represent sellers, so they really see both sides of these transactions.

I'm going to hand it over to them in just a sec, but a couple quick notes. The way today will run is that Bill and James David have a presentation to give, "The Dos and Don'ts of Your LOI." That's going to run for about 20 minutes. And the idea here is that we leave ample time for you all to get your questions answered, or if you don't have your own question, to just learn from the questions of everybody else. So, to ask a question, use that Q&A button button at the bottom of your Zoom window. So we don't have chat turned on. Um, we're just going to use that Q&A feature, um, to funnel all the questions in there and keep things organized. Actually, I have chat turned on, so I'm, I'm going to put something in the chat now, which is just the contact information for James David and Bill, um, so you have that handy for the duration of the the webinar. But otherwise, Q&A function, please, for your questions. And yes, this session will be recorded, and you'll all receive a link to that recording in the coming days. I think that's it for housekeeping. So, Bill, James David, I hand it over to you.

All right, thank you so much, Will. Um, it's good to see you all. So I'm Bill Barlo. I'm the one half of Barlo and Williams. James David is the other half. Um, just to give you a little bit of background on us, uh, we met and were classmates together at Harvard Law School. Um, I went to work on Wall Street afterwards doing private equity M&A. James David also worked at Big Law. Um, and we started our own firm about three to four years ago, and all we do is help people buy and sell businesses. Um, so we see both sides of the table. Um, there's something I would just say is a bit unique is we do everything on a flat fee, uh, especially for Searchers, so that you know what you're paying, we know what we're getting, uh, and it, it usually works out pretty well. So, um, anyway, looking forward to this discussion. Um, James David's going to put the presentation up. This is always, sometimes, and never in LOIs. So, as, as Will said, we work on both sides of the transaction. So these are things that you should always do, and sometimes do, and never do. And this is the idea is to give you a competitive advantage, to to do that while still not, uh, giving away the farm. Um, so, uh, we'll move on to our first bullet point.

All right, so this one might seem obvious, but it's, state the purchase price clearly. The first thing you want to do whenever we are working with a seller, the first thing they look at is that headline number, right? And the second thing they look at is how does that break down? How much money am I getting at closing? How much money is in a seller note? How much money is in an earnout? And that helps the seller determine, you know, basically between the offers. And so you want to be as clear as possible on those points. And I'll also say, you know, obviously there are competitive advantages to certain things. Sellers will, you know, know that cash at close is better than a deferred, uh, seller note, for instance. But, but always do make that clear.

Yeah, so the next thing that, uh, tends to trip people up is that you need to address working capital, cash on hand, inventory, work in progress, right? And this, in many ways, depends on the specific business you're are buying, right? Cash cycles can be very different from business, from business to business. We helped one person buy a business last year, it was an events business, and so it only did two events a year, so it's only getting revenue twice a year, right? So the cash cycle for that is very different than a SAS product that's, you know, getting strip payment every day, for example. You know, so there, there are going to be limitations to what you're able to to know based on the financials that you have. But you need to be clear that the purchase price is going to include, you know, some negotiation around working capital. But again, don't put a number here either. We've seen a few LOIs that put a specific number, and that, that's a mistake because it, it could turn out that the broker and the seller are telling you one thing about the working capital needs of the business, but in fact, the working capital needs could be, you know, three or four times as much.

So, all right, on the next point, is including plans on a post-closing relationship. So this isn't the non-compete, we'll talk about that on a separate point, but this is more, what is your relationship with the seller going forward? And there's really a range here. And one side of the range, you have, you know, I want a few months' worth of transition services for a couple hours a week, just to make sure things, you know, are running smoothly. And at the other end of the spectrum is, I'm going to have an ongoing relationship with the seller where they're going to continue to hold equity in the business. And especially now that the SBA allows sellers to retain equity in the business, that's becoming increasingly common. So, you want to make that relationship clear in the LOI because that's a major factor for some sellers. They're really looking to get out. For some sellers, they're happy to stay involved. And so you want to make sure that you're clear about what you would like. And it can still be a negotiation if they want one thing and you want another, but you want to make sure that that's, that's clear, you know, going into the, the, um, negotiations.

Yeah, so next is the non-competes. So I'll make it clear that will be a non-compete. There should always be a non-compete in these purchase agreements. The three main issues are scope, length, and range. So scope is the description of the business, and often that is, you know, whatever activities the business conducts. Sometimes people fight over whether planned expansion should count in, in that, and that can be a negotiation, but scope is very important. Length is time, and that will depend on what state you're in. Some states are much less favorable to these. Other states will allow, you know, as much as, you know, five years. Some states will only let you do three. And then range is sort of the geography, right? If something is a, a local, a local business, then it may be, you know, 15 or 25 miles. And we've seen anything from that to digital businesses that can be worldwide. While we're on the issue here, I'll go ahead and preempt a question that I know will come, um, because there have been some new, new rules from the FCC regarding non-competes. And if you are buying a business from someone, those rules are not applicable, right? Even in California, right, which is famously not a jurisdiction for non-competes, if you buy a business from someone, you can enforce a non-compete against them.

Yeah, sorry, James David, could I ask a question here? Yeah, go ahead. So the FCC rules have now become, this is, I'm not aware, have become more favorable to non-competes? No, so the, there are rules from the Biden administration that are largely going to, and I don't know the exact posture of where it is in the rulemaking process, but they would largely eliminate non-competes for employees. Ah, and, and where you have to be careful about that is, let's say there's a key employee of the business, um, that needs to stay on and could potentially start a competing business after you buy the business, then they might not, you might not be able to restrict them in a non-compete in the same way that you, you know, could a year ago, for instance. And, and because I would, that was going to be actually my question is, it's in the horror stories from my guests on Acquiring Minds where you hear about this happening, it's not often the seller, it's not as often the seller who goes off and competes with you, stabbing you in the back, or, you know, at least violating the spirit of the transaction, whatever the, the documentation said. It's the number two, or it's, you know, some lieutenant at the business who's like, you know, F this, I thought I was gonna buy the business or inherit the business or what have you. So, so it's, so yeah, is there, is there a way historically to even prevent against that? Biden's rules, new rules are not like that. Seems hard to prevent against. Is there a best practice there?

Yeah, I mean, in some sense, it depends on the, you know, the nature of the business, right? We've seen it a few times where, uh, children actually were the concern when parents were selling the business. Seen that recently. But there, there are things you could do, um, to, to mitigate certain things, especially if it is a lieutenant, somebody else in the business, right? You could have, um, a portion of the payment that is tied to that person staying for X amount of time, for example, right? Or a special indemnification around, around an individual. And if those things are in place, it's not uncommon for the seller to then say, hey, if you stick around, I'll pay you a bonus. So, right, there, there are a few things that you can do, but ultimately, you know, it's one of those things you have to assess the risk and, and make a decision.

And so that tactic, it sounds like it's not a non-compete so much as it is, I'll pay you, or the seller will pay you, key employee to stay, basically. And, yeah, and, and sometimes we, we will have buyers who will do retention bonuses for employees, right? Just as a policy, to get everybody to stay for six or 12 months. But, and, and if the, if the, if the key person does have a little bit of equity, then that could still be enough, right? So sometimes somebody will have just a 1% or half percent equity. Well, then we can make them a signatory to the purchase agreement and tie them in, right? So it, it really does depend on what you, what you have to do.

Okay, and so that, because actually, I've gotten now two, we've gotten two questions with that exact tactic or technique, um, James David, that giving them a token amount, a percent or half a percent, but that that's enough to kind of, yeah, and get into into the whole business. Yes, and you could do this after the fact, right? In your own right, post-acquisition, you could give them a little bit of equity and tie them in with an operating agreement or something like that.

Okay, okay, great. Thank you.

The next point is more of a legal structural one. It's stock or asset purchase. And for the great majority of you, the answer is just asset purchase. Um, mainly because you don't want to be buying legacy liabilities, especially with businesses like these. It's common that their tax, accounting could be a mess. Um, and so the only situations in which Searchers tend to buy stock or use a stock purchase are ones where there might be licenses that are difficult to transfer, there might be key contracts. So sometimes they have vendors or customers that are large corporates, and getting onboarded on them is a big issue. Um, and, uh, you know, there can occasionally be a few other things as well. Um, uh, but in general, sometimes people want to do QBs, U, although that's rare. Um, uh, but this is sort of a structural issue that you generally want to, uh, uh, have at the beginning.

I, I don't know if that was a hand raised, Will, but, Well, actually, it wasn't, but thank you for noticing me because I do have a question, Bill, since you're giving me an opening here. Um, so as you say, it is kind of the the conventional path is is asset versus stock, but I actually just had, did an interview that hasn't aired yet with somebody who, um, has bought a number of small businesses, always asset, and he just did his first stock deal, and he was like, it was so smooth. There was basically, when you buy a business with, as an asset purchase, there's a flurry of switching over accounts, and it's all of this basically urgent but not important stuff that you got to, you got to do just to keep the business going. Consumes a huge amount of time, right, at this pivotal moment where the transition's occurring, but it really can't wait, even though it's basically red tape. And he was like, man, these stock, stock purchases are great. I literally didn't have to do anything on day one because everything just kept humming along. Now, I guess, I guess the, the only other point to that is, may, is it sort of one of these where stock purchases are great until they're not? Like, it's great until, you know, some liability from forever ago comes and bites them in the butt in a way that it wouldn't with an asset purchase? React to this person's experience, please.

Yes, it's great until you get a letter from the IRS or a state taxing authority, or you get hit with an employment discrimination lawsuit from three years ago. Yeah. Okay. Say, as an aside, on larger deals, like if you're talking about, you know, hundred million plus private equity stuff, stock purchases are more common because it's easier in the transition, and you usually have a counterparty that you can pretty easily go after if something goes horribly wrong. The reason why with asset purchases as well is because unlike in those larger, smoother deals, you, you, you know, often it, they're, they're in the wind. If, if something goes wrong, even if you have a claim on paper against them, it can often be more difficult to enforce.

Okay. And somebody's asking, if you do have to do a stock purchase for whatever reason, or do it, or the licensing benefits, or, uh, are there any best practices on limiting your liability if you go the stock purchase way?

Yeah, I mean, any, any lawyer worth their salt, and we hope we're worth our salt, um, would go through all of the, you know, representations you make in terms of the seller will make in terms of the business, have very extensive, um, language around tax. The, the main problem, of course, in all of these deals when you get seller representations is that even if you properly assert a claim, um, and you have a claim, it's sometimes difficult to actually, you know, find the seller, enforce a judgment against them, etcetera, etcetera. So, you know, an asset sale just makes it much less likely that you'll be in that situation in the first place.

So yeah, guys, yeah. Next issue is exclusivity in the LOI. This is one of the things that sometimes gets overlooked, but is actually one of the only terms of the LOI that is a legally binding obligation. So it's very important. Two issues is really, how long does does exclusivity last, right? You'll see a lot of brokers push for 30 days, 60 days. If you're, especially if you're doing SBA financing, you really need at least 90 days, and everybody knows that. It just, it just takes a while. It just takes a while to actually go through the underwriting process and all that. So, um, you know, six, 60 days is where people will land a lot of times, but realistically, make it 90. And then another thing is is extensions, right? You can structure these to automatically extend unless certain things happen, and those automatic extensions, as long as you're continuing along in the diligence process and drafting, uh, documents and that sort of thing, right, to to prevent the seller from, you know, pulling the rug on you out from under you, right, right before closing because they got a better offer.

So, um, this one we're shifting gears to the sometimes bucket. Um, so sometimes signal the basis of your valuation. So if you are deciding on the purchase price based on, for instance, a multiple of their trailing 12 months EBITDA, it's sometimes good to put that in the LOI itself. And there's an advantage to this, and there are also disadvantages to this. So the advantage to this is you're basically signaling, look, this is, this is the metric I'm going off of. If I get into diligence and it turns out that your EBITDA is lower, which frankly happens almost all the time, then what the broker asserted that it was, then we're going to have a, a negotiation, a discussion about potentially lowering the purchase price as a result. The disadvantages, there are two disadvantages. The first disadvantage is that a seller, if they have counsel, might realize that you're basically signaling that you, you could do a retrade depending on financial diligence. So that might make them a little bit wary. If they see that coming in. The other downside is if the business is actually growing quickly, it's doing really well, you know, you always have the possibility of an opposite kind of retrade, right? Where the seller is like, well, you know, I'm doing really well and things are going extra good, you know, be happy that I'm not asking for even more money, and then kind of use that to push you around on other terms like working capital and, and stuff like that. So, this is really something where a lot of people like doing it, and a lot of times it is the right answer, but, you know, it's not, it, it's not always the right approach.

And so, Bill, the, the takeaway there would be, in your own mind, doing this or not, is is your own gamble of whether or not the business will have grown by the time it gets, we get to closing?

Yeah, I mean, I would say if you're dealing with a business that's really stable, right, then I think this is generally a good tool. Or a business that's slightly declining, which, you know, can be a little bit of a problem. I think it can be a, a good tool.

Right, the next thing is to, uh, list key employees, which, you know, some businesses don't have them. Other businesses have two or three people that you, you definitely need post-closing. Uh, and it, it's, it's possible that you don't know who those people are, right? So you can just signal that, you know, the purchase could be subject, or will be subject to key employees signing on. You don't have to name them in the LOI, right? Nobody expects that. One issue sort of related to this is, it's, it's often very sensitive when employees find out that a transaction is about to happen. So you'll have to do a dance with the seller if there are key employees because obviously you're going to want to talk to them before you buy the business, and you're going to want to sign them up to employment contracts. But the seller may not want you to talk to them until, like, sometimes like the morning of, uh, and we're announcing to the team this afternoon. So it, it's a dance there.

And one thing, oh, sorry, Will, I just want to, on that point, because it is such a, it is such a delicate, or can be so delicate, there's no way to, this all comes down to basically you, the seller in the negotiation. There's no way to kind of like legally protect yourself here. It's all about what they'll allow, what they'll be comfortable with, what you can negotiate, how you time it. Yes, dance, as you said. And part of this is why trust matters, right? You need to be building trust at every step of this process because the, the concern for the seller is that, you know, they tell people and then the deal doesn't happen, and then they lose all their people, right? It's a legitimate concern. So you need to, this is why the seller needs to trust you. And I would just add, if you do know that there's one person in particular, um, that might be on the margins, you know, I think we talked earlier about a, um, a family member that they might not see as key to the business, but you might see as very key to the business, or at least a risk, then calling that the LOI is good because again, the point of the LOI is to make sure that everybody's on the same page about what we need to do. And so if it's a type of item that might hold up closing because it's really important, then put it in the LOI.

On this key employee thing, it's so, it's so important. Um, we're getting a question, do you consider it a red flag, a stopper, if a seller won't let you talk to key employees in advance, or do you see deals where the buyer marches forth bravely?

I mean, we've seen deals where, and the talk to employee, key employees in the morning, announce to the team in the afternoon. Um, we, we've closed on multiple transactions where that's happened. There can be other ways you handle it, sort of, if they absolutely refuse, you can, you can do some things structure-wise in the, in the purchase agreement. But, and then other times people talk to, let them talk to the employees two weeks in advance. So, but it's not totally unheard of, or therefore, it's not really a red flag in all cases at all, that a seller would say you can't talk to key employees until hours before we do this thing. It's, it's, yeah, I mean, it's definitely a yellow flag. Yeah, but, but it's not a showstopper for most people.

Thank you. All right. Um, next one, addressing key contracts. This very much depends on the business. There are some businesses where there are just no important key contracts. Um, key supplier or customer relationships, usually supplier relationships are fine, they're more than happy to keep selling to you. Occasionally, you will have a very key partner, almost that maybe licenses some of the businesses or does something like that, and you need to nail that relationship down. Customer contracts, especially if they're valuable, are extremely important. So I would say, you know, know what is really driving the value of the business, and if the value of the business is in certain customers, then you have to, you should list in the LOI that this is an important item for you.

Now, we'll get to one of my soapboxes. This is something you should never do at the LOI stage, and that is, don't, don't offer a hard money deposit. Right? There are a lot of brokers, a lot, some brokers who who want to do this, but you're, you're buying a business, you're not buying real estate. Things are going to change, something's going to come up in diligence. Just, just don't offer a deposit. It, it's just not necessary, and is a tactic by certain brokers to try to force you into something. You, you need to be able to, you know, put distance and, and be able to walk away. Just, just don't do it. So that's going to be the end of our initial presentation. I'll leave our contact information up on the screen for just a bit while I stop my screen share, but, I think we will turn it open for the Q&A. So hand it back to over to you, Will.

Great, they're coming in. All right, on the, on the deposit, the hard money deposit, what if it's a refundable deposit? So asks Latif.

I mean, so that's the difference, right? Hard money means you can't get it back, right? So I did qualify it, but, um, but if, if there is a deposit, where does the money go? Right? Because if it's going into an escrow account that you can get it out of, well, all right, that's not really a deposit. If it's going into an escrow account that the broker controls, then that's a problem, right? So it's really about where, where the money is. Me, it realistically showing proof of funds should be sufficient, right? Because one thing to add is, it is so common that there are problems with the financials in the seller, and you don't want to be penalized and have them basically hold your deposit, $50,000 deposit or whatever, hostage because they didn't get their financials in order. So.

And is it typically a tell if, if that the broker is more of a real estate broker, if this is required?

Okay, yeah, so it's kind of like a broker that doesn't really know how the game is played, is is really what's usually going on there.

Okay, yes.

Here's a question from Philipe. What do you see as essential questions to ask the seller pre-LOI to create a stronger LOI, to your, you know, the, your whole strategy of being more competitive with a really solid LOI versus items that you can, that you can clarify post-LOI during diligence, given the competitiveness of this market, lots of buyers, um, sellers seem to want to minimize these upfront discussions. So what's the, how do you thread that needle?

Yeah, I, what often happens, um, is you will sort of, you know, people talk about IOIs and LOIs and whatever. What, what will often happen in a competitive situation is people will submit LOIs, the broker will collect them, look at them with the seller, then there will be sort of the finalists, and then there will be further discussions. So it's not uncommon, um, if we are, say, for example, that we go back and forth on an LOI three times, you know, two or three rounds of back and forth red lines before it gets signed, right? So you shouldn't necessarily expect, even that this, the LOI you're submitting is going to be the final LOI, right? So don't, so if that's the concern, right, because I know it, it's a big mental block for a lot of Searchers to actually just send it, to send the LOI, so, you know, again, if there, if you feel like there's something you don't have, well, just send the LOI, right? That, that's the first thing.

The one thing I, I, I'll just, that's excellent, and I'll just add, the most important thing you can be doing pre-LOI is establishing a relationship. So you do not want to sacrifice the seller being annoyed with you to get a little bit more information in the LOI because the, the goodwill that you're getting, that doesn't mean be, don't be detailed, right? Be detailed, be, be everything, but don't sacrifice that relationship because, in, in our experience, there are two main things, really. First is obviously the purchase price, those terms, that's like 90% of it. But another important element is, do they like you, right? We have seen situations where sellers have chosen a lower bid because they genuinely liked the buyer and thought that that was the right buyer for their business. And that might sound a little crazy and emotional, but this is an emotional decision. So, um, I would say, you know, be excited about the business, just don't tire your seller out with kind of incessant questions if it feels like it's not being welcome.

If you have to back out of an LOI after doing the initial diligence on the financials, numbers come back, they don't look good, you want to walk. Is there anything that the buyer, that buyers should be mindful of so as not to have issues? We all understand that LOIs are non-binding, but is there any legal tail to this or risk? Can you just say, sorry, no buy?

Yeah, I mean, the best practice if you are going to terminate is to send a formal termination notice, right? So that it makes it clear that exclusivity no longer applies, and they can relist, and everybody's just done. And that, that can be done via email, usually. Sometimes people will will sign a little one-page agreement, but it, it oftentimes can be done over email. But it is best practice to formally, to have a formal termination.

And anything in the LOI document itself to cover, uh, downside risk, cover risk there?

One thing I would just mention is, I, I have seen this happen on one occasion. You do not want, especially if you're using an LOI from the broker, like their template, they might have language about expenses in the event that you walk away, that you'll pay for their expenses. You do not want that to happen. I have seen a situation where a client signed an LOI without reviewing it with us, it had language like that, and then after the LOI broke for no reason, no fault of the client, the other party sent a demand letter saying, here's $80,000 in expenses. Now, that was, that was an extreme situation because I think the other party was frankly, uh, uh, fraudulent and just trying to get money out of the other person. But still, you don't want to put yourself in a situation, especially if you know the deal gets almost to closing, where they legitimately have a $40, $50,000 bill that they're sending to you and saying, please pay this, right?

Yeah. Should the Searcher be involving their attorney pre-LOI?

So I would say this is the approach we usually take with Searchers. We obviously like to establish a relationship early on, and almost as client development, we'll have a free consultation where we'll talk over an LOI generally, their principles, help them out. Maybe the first time you send an LOI, you're not going to be able to use an attorney every time you send, send an LOI, especially if you're sending a lot. What you generally will do is once you get a response, so you know, you send out an LOI, almost never the seller is just going to sign it, right? They're gonna come back to you and say, hey, I like your offer, but, you know, here are some things, and it looks like you're, you're actually getting some back and forth. That's the time to bring in an attorney to, you know, stamp out and, and finalize those details, right?

So, to be clear, I guess that was a question that I've heard before. First time you send out an LOI, talk to you guys, you guys will do that almost as a kind of a free consultation with the new client. Then assuming you're sending multiple LOIs, when a buyer, when a seller comes back and engages you, kind of got one on the hook, uh, at, at that point, and the LOI is going to become more serious, re-engage with your attorney to, to make sure things are dialed in.

Yeah, exactly. Great.

Back to assets and asset purchase, stock purchase. Um, question is, it has been my understanding that liabilities still transfer with an asset deal, even if there's no business left behind. That is, the IRS can still come after a buyer in an asset deal because the business that incurred the tax liability is still de facto exists through the assets.

Yeah, the, the carryover of liabilities, it's actually gotten messier recently, but it depends on the nature of the liability, right? For example, sales tax is notorious for you not being able to get rid of it. Um, um, certain employment liabilities, certain employer liabilities, you can't get rid of. Um, and then there are some states where they make it stickier. California makes liabilities a lot stickier. Should you repurchase a business? But it, it does depend on the, the act, the specific thing and what the tax adheres to, right? Regular sort of income tax, not, not so much.

Yeah, I, I would say I don't think that that is correct when it comes to federal income tax. You know, they don't know, the IRS doesn't receive any notice saying, here's the EIN of the company that just bought all the assets from this other, you know, am, you know, they don't, no, nobody tells them that. So how, how would they even know? So, you know, I would say, their state tax, sales tax, yes. Income, federal income tax, it's much lower risk.

Yeah, I mean, you will, you will be filling out a, a tax form through the transaction, right? Federally, right? What is it, 8594? But that's allocation of the purchase price, that's not related to legacy liabilities. But, but as part of this process, not necessarily at the federal level, but at the state level, you will usually, if, if something is doing quite a bit of revenue, profits, you, you'll get tax clearance letters from the relevant state and local authorities as part of the transaction process. So, yeah, fork sales laws, in case you're nerdy enough to look it up.

Okay, uh, guys, a couple questions here. Um, your flat fee structure, got people's attention. Can you elaborate on that? How you charge, even what you charge? Maybe that's, this isn't the forum for exactly what you charge, but if so, please share. And then also, maybe contrast the end result of, of, of your structure versus the conventional way a lawyer would charge, an attorney would charge.

So we will generally give a flat fee. Will you us have a conversation with the client about the target business because obviously it's different if there's a lot of regulatory care or other things, you know, comparatively. So we will have a discussion with them about sort of what that, what that flat fee looks like. It always depends on the nature of the business itself. I think a rough estimate would be 1% of the purchase price, but it can be lower than that, it can be higher than that. It depends on complexity, it depends on a couple different factors. In terms of, um, so I think that hopefully that gives you a sense of how we, how we generally do it. In terms of the other question, which is the benefits or detriments of that model, I would say the real benefit is that we are not incentivized to do a lot of back and forth that's unnecessary. So you'll see a lot of times with attorneys that are billing by the hour, it looks like the documents have been dipped and ready, and, you know, I did that when I was on Wall Street, it was like, give it to the associates, you know, make it as much markup as possible. The problem is, it's actually a worse result because first of all, a lot of things get messed up in that back and forth because it's a lot less clean of a document, and then the second thing is, it slows the deal down, right? You could potentially slow up the deal for legal reasons by like a month, uh, just because of back and forth on issues that really should not have taken that long. Um, so I, we think it just, it aligns incentives well to get the deal done. You know, we're obviously gonna, we have our duties, we're going to protect you, we're going to do everything that's market, but we're also not looking to create problems so that we can increase our billable hours.

Yeah, and, and let me jump in on some of the mechanics of how we do it, especially for for Searchers. We often are paid in sort of of two or even three tranches. So we will take a little bit into our trust account, sort of at the very start, often then another tranche of money when the client decides, okay, let's move forward, let's draft the purchase agreement. And then often times we, we take the bulk of our compensation as part of a closing disbursement, actually, because we know how tight, uh, it is for, for Searchers and how, how important those budgets are. So we're, we're willing to work with Searchers to, to take a decent chunk of our money on the back end as part of the, the loan proceeds for the SBA.

And one, oh, sorry, just, just add on that is that if the deal doesn't go through, you're not going to be out the full fee. So we charge by the hour in the case that you spend an hour or two on the LOI, you might, you know, $500 an hour is our current rate, you know, you might get, you know, $500 bill, but we're not going to be taking the full fee in that case. We're refunding you everything else, and we'd be crediting it to the next deal you do. So, you know, you go through a process with us, the first thing falls through, you use us on the next one, and it goes through, and all that just gets credited because the idea is, you know, we know that you're working within the constraints of a legal budget, and, and we want to make, you know, good on our promise that that's that's the fee we stick to.

Excellent, that's great, guys. Thank you.

Under what situations does it make sense or is it even necessary to have a lawyer from the same state as the target business?

It is not often, necessary. I would say that you will want one if you have a lot of stuff that is very local. So I find it helpful, usually actually, it's if you're a buyer, it's often more important for the seller to have counsel that is sort of like local, if they are, you know, they've got a lot of real estate and other stuff that they have to deal with. Um, I would say that's much, much more important. Generally speaking, is experience. So do they, do the type of deals in your area? And there, you know, a lot of times if you're doing something, for instance, in healthcare, you often want somebody that does a lot of that. Like we don't really do that much healthcare. Um, so you want somebody that actually does healthcare providers, or, you know, just as an example. So, uh, uh, yeah, I would say specialization is 90% of the time more important than, uh, geographical locality.

And, and when there are geographic issues, right, we, we're both in North Carolina, right? So if we're working on a transaction where there's some esoteric employment law issue in California, right, then we're going to reach out to other attorneys, right? We're going to bring somebody else in to help with that for a little bit of time, right? And, you know, that sort of thing, if you work with us, is included in the umbrella of what you pay us. We also have, you know, specialist tax counsel that we consult with all the time, right? If there are weird sort of structuring issues, which doesn't happen often in Searcher deals, but, but can.

Speaking of, are there any specific states that are much more complex or prone to possible legal issues post-purchase?

California. You know, California does California things. New Jersey has a really, um, odd bulk sales law, if I remember from a couple transactions. New York can have kind of annoying employment law stuff. But, I, I wonder if the spirit of the question is like, should the state that a target is in disqualify the deal if it's otherwise attractive? Probably not. Yeah, sometimes it could. I mean, I know that for, uh, sort of plumbing, HVAC type businesses in California, right, that you have to be the license holder yourself to be the owner, right? That may not be the case in other states, right? So there could be something like that that is specific to the business type you're looking for and at a particular state, that may make it unfeasible or infeasible. Um, but otherwise, yeah, it, it doesn't matter. And, you know, it's not even, it's not always necessary depending on the nature of the business, right? People sometimes ask, well, what state does my LLC need to be in? Most of the time, just wherever you, wherever you live. And don't overcomplicate. Right? You can get the Delaware LLC if you, if you want, right? A lot of people do that, but don't overthink that unless you're in New York because you have to actually publish in a newspaper if you're making an LLC in New York. So, fun fact.

And that said, from someone who is licensed in the state, no wonder I haven't had a, have I had a guest in the state of New York? I may not have had a single guest yet. Probably forgetting somebody. Well, they all do Delaware LLCs up there.

So, Bill, somebody wants you to repeat the term that you shared regarding the research that was tied to the 8594 tax form comment.

Me, the, the, I think 8594, 85, I think Bill was the one who, what was the thing you said if you wanted to get nerdy? Oh, bulk sales law. That's, that's don't actually do that. Um, they're state specific. A lot of states don't even have them anymore. Um, but it's, it's sort of a filing, um, that you have to make in certain states that I think in, in many ways, um, is meant to announce to other people, you know, other potential creditors that, like, all these assets, all this inventory, right, if you have a retail store, right, all this inventory is being transferred. If you have some sort of claim against it, you need to bring that claim within such and such time, or you lose it, right? So it's just, it's just one of those technical things to help sort of break the, the chain of liability. And, and another reason for it originally was that if you had businesses with lots of inventory, they were like, well, that's inventory being sold, it's not, you know, this shouldn't be subject to a sales tax per se. And so there were certain questions about that. So anyway, yeah, bulk sales laws is what it is, but really, please do not, do not.

Another question on tax. So we talked about how the, the state and tax, excuse me, state and local tax being one of the tails that might follow an asset sale. So Tyler asks, are state and local tax clearance letters typically included as a stipulation, a purchase in the LOI?

No stage. They're, they're almost always, you know, de facto closing conditions, but they're, they're almost never, I don't know that I've ever seen one in the LOI.

Yeah, yeah. And if you're doing an SBA process, right, it's often one of the checklist items for the, your lender. So, yeah.

And even if you're in a place without, uh, bulk sales laws, what you'll want to do is you'll want to run a lien search, tax, that's tax lien search, just to make sure that there's nothing outstanding because if there's liens on the assets that you're buying because of unpaid taxes, those will follow. So just FYI.

Some questions came in that I didn't see while you were describing your services. Do you guys typically represent the buyers or sellers? What's your split there?

Honestly, around 50/50. Um, so which we think is actually a pretty good thing because then we have a good sense of what both sides of the market are. And, you've already said this, but somebody asked, so repeat it, if a deal falls through that you're working on, services roll into the next deal?

Yes, we do have, we do have a three strikes your out policy on that because we had one particular seller who rejected, I think it was six different buyers and never did sell his business. So after that, we implemented the three strikes policy. Since we have implemented that policy, no one has recorded more than one strike.

So, okay. And that's, you have three strikes, you're out for either buyer or seller, correct?

Okay, because I imagine with some buyers, they might try three times and fail, even though they remain. And let me be even more particular, right? That applies to an assigned LOI, right? So if we help you send multiple LOIs, those aren't strikes.

Okay. How do you guys view the need for quality of, uh, quality of earnings, QOEs? How do you all tend to work with QOE providers, if at all?

You know, usually the dance around that, first of all, you know, you're going to need to do financial diligence, full stop. Whether you need to do a full QOE will depend on the lender requirements and, you know, other things like that. We always love to see it, obviously. Um, I would say that, uh, we, you will typically when you run your process, sign the LOI, the legal folks will send off some questions, like, but you're not going to want them to start drafting on the purchase agreement.

Until the finance guys dig in there, because there is, if the deal falls apart, it's almost certainly because there's something in the financials that means that it doesn't match up with what the broker told you, and you don't want lawyers to be burning hours. I mean, even for us, it's still hourly if, if, if the deal falls through. So you don't want us to be burning hours drafting documents, um, if you're not sure that the financials are really in order yet. So that's what we would do. We usually say QE comes in, those guys do their thing. We will then also talk to the accountants, not really on QE stuff, although a little bit of that in one to help with working capital, making sure all the language there is correct, and two, if you do have an earnout component, then we'll often be working with the QE guys to say, okay, what should count for EA, what shouldn't count for EA? But most of the time, they're relatively separate. We like each other, but we're a little bit like ships passing in the night sometimes, like, "Hey, glad you did your thing." So, okay, this might be a ships passing in the night question as well. Any comments on, um, acquisition structures and working with tax lawyers to like optimize the transaction and outcome, I guess from a tax perspective? So here's what I'll say. I think a lot of people get an idea that this one cool trick IRS agents hate them, you know, sort of thing. Uh, the answer is, most of the time the structuring stuff will happen more on the sell side. Um, from the buyer's perspective, your main goal is usually to make sure that you can depreciate the assets. So the, the most complicated it might get, for instance, if somebody is in an S Corp, they want to sell it as an S Corp, and you want to make sure that you buy it, uh, because you want to do a stock purchase, but you also want to depreciate the assets. So you have to do an F reorg. So, you know, there are different things like that. A lawyer that knows what they're doing will be able to pretty clearly see which situation you're, you know, what category, what box your transaction falls into, and then say, "This is what we're doing." You know, and if we do have any issues, we call tax counsel, like that's what they're for. I'll also say as a caveat, probably not as important for searchers that are using SBA, but if you are buying outside the US, then there are special stuff that kind of come into play with that as well, right? I don't mean to keep coming back to you guys, uh, but I keep getting questions. So your, and this is an important one, the your website emphasizes digital. Tell people, do you just work with digital? Set the, set the record straight there. Yeah, I would say that we have a specialization in digital, but we're not exclusively focused on digital. So about 50% of our transactions are SAS, e-commerce, marketing agencies, etc., but the other half are more Main Street, you know, businesses. So we have a great client that is buying, rolling up restoration businesses. We sold a business that manufactured tombstones, of all things, that was a great deal. So, you know, we do, we do the full range. And and we do have that specialization, but you shouldn't feel coming to our website, and we're redesigning our website a little bit to make that clear, but you shouldn't, you shouldn't feel like, "Hey, I have a Main Street business, these guys, you know, are not quite quite for me," because we, we do that all the time as well. Great. Um, sequencing of setting up the LLC prior to submitting an LOI so that those expenses can be passed through that LLC, or Waters had more of just kind of a personal bookkeeping question. Yeah, I mean, some people think it makes you look more professional to, to be sending it on behalf of an LLC. I don't necessarily buy that because even big corporates will say, right, to, you know, it'll be filling, fill it in a blank of entity to be formed later. Um, I mean, if it, if it helps you mentally, right, if that's a sunk cost to get you to commit to to moving forward in the process, then absolutely, right? Form your little, form your, don't get fancy with it, right? Single member LLC, just spin it up where, in whatever state you're in, and and get, get going, right? Don't let that be a stumbling block. But is it essential? No. And I think James David is hitting on a theme here that sounds like you guys see a lot. I see a lot. There's a lot of, um, ways to be distracted in this process and to not build your own, to stall your your own momentum. Um, so, and and James David earlier said that like sending that first LOI is is kind of a classic psychological hurdle to get over in a, in a new, in a first-time buyer's, uh, process. So just be wary in your own psychology of, are you investing time in things and questions that are effectively procrastination rather than getting on with it? Um, uh, a couple of questions going back to LOI, LOI dynamics, working capital. Tell us please again, to what extent that should be spelled out in the LOI? Often, often LOIs will just say, you know, the business will be delivered with a normalized amount of working capital, all right? Or or some sentence like that. Um, you just, what you want to do is signal like, "Hey, this is something I care about. This is something that I'm going to do diligence on, something I'm going to fight about if I need to." Right? Uh, but don't put a number on it because at this point, you don't know. And then inventory, usually too low. Um, the, the other things I would mention is some businesses, inventory is an incredibly important part of the business. I mean, e-commerce is is very much that way. And so in those cases, you might want to specify, "We're going to buy inventory on consignment because we don't want to buy two years' worth of inventory if we don't know we're going to sell it." Um, if it's a project-based, uh, business where they charge up front and they're 30% of the way done, you might, you know, indicate that that's going to factor into the purchase price. So I, I would just say in special cases, you may want to say a little bit more, but I agree, like we're not usually, if you put a number on it, you end up needing to do more after you due diligence. Great. Um, we are about at the hour, guys, um, but you guys, we still got questions coming in, so can we keep rocking here for a few more? Happy to. Okay, great. Um, working with, uh, investors, so which of course is a whole another layer of complexity in a, in a search, although not at all uncommon, probably more common than not. Does that change your fee structure if, if that whole element is there? Yes, that, that is one of the things that can affect it, um, because the, and the number of investors can be very different. We're doing one right now where it's a father who is sort of the investor and the son is buying the business, and so about as friendly as the negotiations could possibly be. Uh, but we've also done them where it's, you know, entire six, seven investors, right? And we're, we're wrangling all these people. U, and, you know, as a general rule, the fewer people on your cap table, the better, right? So the fewer investors you have, the easier things are. Uh, but yes, I mean, that's, that's part of the conversation we have, right? We, we want to know your financing situation, and that will include investors because, you know, we've done enough of these now, we know how much work is going to be involved more or less. Somebody's asking if you share, have an LOI template that you prefer and can share with the group. Um, we don't necessarily have a, a template that we, uh, we prefer or share, right? They tend to sort of vary based on the type of business and, and most of the LOI templates that are out there are sufficient with a couple of edits. Uh, and what we are going to share after the presentation is sort of a one-pager, um, concerning sort of the, the 10 things that we've gone over, U, at the start of the presentation, uh, just as sort of a checklist or reminders, right? And, you know, sort of in combination, that document and, and any of the templates that are that are available online, maybe also in consultation with us, and, and you should be fine. Uh, because if, if somebody just gives you a template and says, "This is, this is the Bible to use," you know, you're going to need to be able to know what to customize. One thing I'll mention is is that templates will often be of necessity a little over complicated because they want to be over inclusive, which is fine, but also sometimes will over complicate the process. So if you kind of know what you're going for, again, if you talk with us, we can help you kind of make a streamlined version of the template that makes sense for, you know, the type of businesses you're going for. Great. Um, James David, I think it was you, uh, when we were talking, when we were talking California and you, buyer having to be the license holder of a home service or like a plumbing HVAC business in that state. LIC and a home services business or kind of a specialty trades business in general, licensing is often a sticky issue or at least some that needs to be addressed. I don't know what the question is. This is this is just for me, but you just see it come up time and time again. Um, so I don't, I don't actually have a, a super tight question here, but is there anything that you can kind of riff on about this question of licenses, which comes up over and over again? It's something, it's, it's one of the biggest questions we ask for people, uh, who are looking at these sorts of businesses. You know, we, uh, probably three out of four, four out of five times we talk to someone who's looking at that sort of business, we try to dissuade them from buying it, uh, actually. Oh, unless they're a license holder. If they're a license holder and they plan to get the license and own it themselves, that's a little different. What, and it, it doesn't have to be that way, but they need, there needs to be a very clear plan in place. Um, because, you know, you, you could get in a situation where you're effectively held hostage in a business that you own, uh, by somebody, you know, by this employee who's your only license holder. So, like, we, we really caution people, like, have a plan in place before you go down that route. U, and a lot of times people get frustrated with that conversation and decide to work with somebody else. So we do still, we have done those transactions. We don't do a whole lot of them, right? But, um, but we, and whatever business you bring us, right, when we see a listing, as part of our initial consult, we're gonna try to tear it down a little bit and crush your dreams. Uh, like every good attorney. Yeah, I mean, that's, that's our job is to see the, see the downside, right? So if you're going to work with us, expect us to to ask you questions, U, and, and we really like it when our clients have a plan. I want my clients to succeed post-acquisition. I, I love, uh, you know, following people months and, and even years now, and see, see how well they're doing, right? That, I, I get enjoyment out of that. So, Bill, were you going to add something? No, I, I think I'll just reiterate that we, I, I would say in our experience, it is difficult to be a truly passive owner of something like a licensed electrician, etc., etc., business, because if it's, it's just the sort of business where it's hard to get the sort of clients and respect and do everything you need to without being a little bit more boots on the ground. That's the nature of, you know, some type of blue-collar job. So again, you know, our goal here is for you to succeed, and you might disagree with us, you might say, "You know what? I've heard you. I'm still going to do it." Okay, that's fine. But if, if we see common patterns that that that are issues, we raise them because we want our clients to succeed. Like this isn't just about getting a deal and like, you know, good luck. We, we want to make sure that you're getting something that is going to be a real one for you going forward, not just a deal that gets done. But to be clear, guys, we're, I'm not talking about somebody who's gonna passively run an electrician business. They're gonna be in it, but they just might not have a license or frankly know the first thing about electrical work, but they do plan to be living in the business, operate owner operating the business. Yeah, and, and sometimes in those cases, it can be better to be buying something a little bit bigger, right? If you are doing that, you can buy it a little bit bigger because then that decreases the risk, right? What you, what you don't want or is a larger risk is if there is just one license holder, right? So if you, if you're able to buy something that has multiple license holders, well, then that's going to de-risk the transaction. Yeah, yeah. But can't it just be like we were talking a lot at the top about key person risk? Can't this just be a version of key person risk? So you, the person who is the license holder, if not you, owner buyer, you just do every, throw all the tactics at them to incentivize them to stay. I mean, yes, if, if you were buying a, a business that has licenses like this, then they are definitely going to be key employees, right? The license holders, right? So yes, that, that is very much part of that conversation. Okay. Um, when we were talking stock asset purchase, asset purchase, earlier, uh, the, F, what is it called? The F reorg? Yep. Am I, am I even saying that correctly? I've had a guest or two mention it, but it's been a while. Can you just give people a quick definition and then tell us how you feel about it? Yeah, it's basically a, uh, reorganization you do when somebody wants to sell an S corporation. So that's, you know, a C corporation that's taxed as an S corporation, which basically means it's taxed as a partnership. It's a fairly common structure you'll see in seller transactions or or in search transactions. And essentially, it allows people to get the both of best of both worlds because you get to buy the stock if that's what you need to do for licenses or other reasons, uh, you still get to depreciate the assets, uh, so you still get advantage of that. And, you know, it's attorneys that have done it for, we're not going to get into the mechanics, but it's, you know, just shifting around a couple things so so that it works. So it's, it's basically if, if the target is an S corporation and it is the type of deal that is a stock deal, there's a pretty good chance you're going to do an F reorg. Okay. Couple questions came in about IRS Section 338 H10. Yeah, it has. There can you give us a quick definition? James David, so that's another one of those sort of hybrid, right? It's a stock deal but treated as an asset purchase for IRS for federal tax purposes. Um, it's probably less common because there are some very particular requirements for those transactions. Um, I don't know that we've done one recently, so I don't know off the top of my head what those are, but I know that there are some very specific things that have to be true. And so, um, not as common. You know, the F reorg, the bill just described, is is a much more common situation. And it's also the case that there's, it's fairly uncommon for you to be doing buying shares in these situations, right? Anyway, so yeah, just, just reiterating that. Okay. We touched on it. I'm surprised we haven't gotten more questions about it. The, uh, A rule changes that allow sellers to retain ownership in the in the business post-close. Maybe, maybe a quick definition on that, what that rule change was, why it was significant, and then what you're seeing out there. Yeah, so prior to this rule, uh, the SBA required that a seller be completely out of the business within 12 months post-acquisition. And now, uh, that is no longer the case. Uh, the seller can retain up to 19% equity in the business, business, and also not have to sign a personal guarantee on the SBA note. This is, we've seen it a few times now. It is a situation where you have to be purchasing equity instead of an asset purchase. So this is another reason that you might end up doing a stock, you know, a stock purchase instead of an asset purchase, uh, is you, you have to do it that way. U, but it is possible now that the seller could retain, the seller could could retain more than the 19%, but 20% is the threshold to sign the personal guarantee on the SBA loan. And no seller's going to do that. Uh, but you can now do that sort of rollover, which can, you know, better align incentives, right? If the seller wants to stay on for a little while, sort of, you know, gradually retire, for example, or, you know, you just need it to make the math work on the deal, right? It's, it's another, another arrow in the quiver. One other thing I'll mention is that, uh, it also helps with earnouts. So doing earnouts with SBA is notoriously tricky because SBA says they don't do earnouts. What often has happened is you get a forgivable promissory note. So basically, it's like, okay, I'm going to pay you seller this amount of money over time, but if I don't hit these revenue metrics, then the principal is decreased. Well, that works. The only problem is that the SBA then has to underwrite that full amount as if that full promissory note is getting paid. And sometimes you're, you're stretching the limits of your underwriting at that point. If you have sellers retain equity, then you can do a special distribution, as, you know, if you're an LLC, that basically gives them a right to a special distribution if certain earnout metrics are met. And that way, you can have earnout effectively earnout dynamics, but without having something that will problematically trigger the SBA, uh, or force you to underwrite more than you want to. So, you know, that's just an example of a different way in which it can be helpful. And what are you guys seeing out there? Is this something that's changing the market? Are people taking advantage of it a lot? To a, yeah, it, it took a few months to sort of filter through and people to figure out what it was and how it could be used, but, U, yeah, we've already done a couple of transactions using the structure. Okay. For structuring an SBA loan with a partner, uh, is there a way to have only one partner make the personal guarantee at the company level? So 20% ownership, but have equal ownership at a holding company level? So I guess really what the spirit of this is, is there a way that just they want to go 50/50 in this project, but that only one of them take the PG? I, I think that's a fair. Here's what I'd say about that. This is a conversation that you want to have with your attorneys offline. What do you mean? Well, just because, so there, you do not want to be doing things that, uh, are defrauding the SBA and saying you want to do this as opposed to that, and, and other stuff like that. So the, um, I guess what I'm saying is is that we have seen a couple different, you know, creative structures proposed that can do different things, sometimes using debt instruments, sometimes using other instruments. And so, but this is, I, the reason I don't want to like take a very strong public, you know, position on this, just because you don't want to say something that's like, "Oh yeah, here's, here's how to get around the SBA rules for this particular thing," because, you know, I'm not, I don't, I don't want to be on record telling people, "Yeah, this is, this is how you lie to the government and get away with it." Like, that's not, yeah, yeah, yeah. I do want to be on the record saying, "Don't defraud the SBA." Yes, yes. Yeah, we, we've seen people propose things that very clearly skirted or, you know, were in circumvention of SBA rules. Don't do that. Yeah. And I, I'll just say too, anecdotally, like, there, there are a number, you do see this come up quite a bit where, you can either really push the, uh, the spirit of the SBA rules, and depending on what your lender is comfortable with, lender A might be willing to do it, lender B might not be willing to. You can make it happen. And the other important feature of this, and I'm not encouraging it either, everybody, so this is very, you know, this is very, uh, perilous territory, but the SBA is basically known for not, your lender is known for not really checking up on you post-transaction. So there's this sense that if you can get, if you can just get it done, then nobody's going to be looking over your shoulder thereafter. Um, I'm, I'm just trying to educate the market. I'm certainly not encouraging that, but, um, that's there you go. Uh, all right, let's see. We, I think it is starting to slow down, so maybe just one or two more. Um, forgivable seller notes, if the forgiveness is triggered, is that considered a taxable event for the company? People, people have very different opinions on this, actually. It's one of those hot button issues, and I think a lot of people are talking, trying to come up with a new phrasing, um, that it, to to better summarize it. And some of it is going to depend on your accounting and your accounting stance, you know, your the position you to take. Um, but I think most people would say, most people say no, but that's, that's going to be something for you to decide with your accountant. Um, I think the answer is going to be similarly clean to this one. For LPs who own more than 20%, how can they get around the personal guarantee? These words, "get around," are dangerous, right? Yeah, it's, there, there can be, right? There, there can be things, um, to do it in weird structuring ways, depending on the, the cap table, right? You can split, you know, what sort of different ownership rights can be split up different ways. You can have these weird, it really does depend, um, on the individual transactions. But again, right, and I think it's best practice to be honest with the, um, and, you know, don't defraud the SBA, right? There are the rules, stick within them. There's certain things you can do, um, but if you feel like you're didn't need to get too creative, then it's probably a bad idea. Yeah, I would say, you know, this is the sort of thing that I feel like a lot of searchers spend a lot of time and energy thinking about before. I would say that, you know, creative structuring is rarely, you know, when I think of deals that work and other things, it's, it's rarely the case that they've done a lot of really creative structuring. It's usually just they have a good deal, and we can figure stuff out on the other end. But I would just say, make sure you're directing your energy, uh, and your efforts appropriately, uh, because I think this is something that searchers get very hung up on in the early parts of their process, but usually doesn't end up mattering as much as they might think, and it introduces deal risk to have more complexity like this, right? To have more complexity of your structuring as a buyer, right? If the seller knows that it, your your offer is less competitive. Yeah, exactly. Also, in the case of an LP, I mean, most LPs who know this space understand this 20% threshold. Sated. Yeah, the sophisticated, they're gonna want to not, they're, you're gonna have to an LP who's also similarly comfortable, you know, kind of bending the rules or trying to skirt the rules. No, people are not gonna want to do that. The people who are regularly investing in these sort of deals know how these things work, and they're gonna structure things accordingly. Um, Marty's asking this the second time. Thank you for circling back, Marty. I missed it the first time, and I think this is going to be our last question. More related to the purchase agreement, what are your thoughts on rep and warranty insurance split between buyer and seller to mitigate each other's risk in a stock sale? So we have seen and recently talked to some rep and warranty providers that are getting into this market. It can be a solution. I would say this is something where you definitely do want to just talk to your attorney because it just, it depends on how big the risk is, right? And, and a lot of the risks, for instance, since tax is one of the big risks with the stock purchase agreement, that's going to be excluded from R&W insurance, right? So R&W insurance is great for certain kinds of risks, but it doesn't cover other kinds of risks. And so just know that that if you're going, it's not a catch-all solution for that. And not to say that it's not the answer for some things, it's not a catch-all solution, and it's also a very still a very new product in this sort of subscale, you know, lower middle, you know, subscale market. Um, and so it's still, people are still kind of figuring out, you know, what it's good for, what it's not great at. Um, but there can be times when it can help smooth, right? If, if you have a really anxious seller, for example, right? Then rep and warranty insurance on one side or the other could help get the deal, could help get the deal done. So I don't want to completely disparage it either. Yeah, exactly. Great, guys. Well, I think let's close it here. I want to just say a couple housekeeping things to the audience. Your contact information is right here in the chat, the webinar chat, right there. People, it should have been on their screens the whole time. So if, audience, you didn't get your questions answered, either reach out to Bill and James David directly, contact information right there, or we're going to be doing these monthly, so keep an eye out for another office hours, legal office hours in a month. We'll do, James David and Bill will do another, um, presentation on something different. And, but we'll again leave as much time as we can to really get your questions answered. That's, that's what a lot of this is about. Um, so guys, did you want to close with anything? Well, you know, as always, please feel free to reach out. Um, we're more than happy to do consultation calls. We know that this can be a scary area, especially if you're approaching it for the first time, and you don't want, you know, the bills to start right away. So, you know, feel free to reach out, schedule our consultation. You know, we don't bite. I hope not. Not unless you're the opposing counsel, then we bite. Um, and, uh, and yeah, no, it was, it was great to have us. Thank you so much, Will. This was, this was great. Well, it was great. You guys are, uh, clearly super experienced at this. Um, I don't think there was a question you flinched on, so very impressive. Great content for everybody. Uh, audience, so you'll get, um, email, an email or emails from, uh, me or Bill and James David, or both, with the recording, with the slides. No, it, it's going to be with the one-pager that is more explanatory than the slides were, so you said, right? Um, and, uh, yeah, and you'll have all of our contact information. Look out for com to come back if you have questions that didn't get answered, or reach out to Bill and James David directly. Now, thank you everyone for coming. This concludes the webinar.