Levels of Business Lawyer Involvement

The level of lawyer involvement in any business transaction can vary. Some clients wish to limit their lawyers involvement to a very basic level, while others need significant legal assistance. Sometimes this decision is based upon the type of transaction, the issues at stake, or the client’s legal budget. Many times a potential client is not aware of the different levels of assistance that are available or the value that a lawyer could add to a transaction.

The highest level of understanding how a business lawyer adds value to a transaction, and the primary value to a business, is the market information that the business lawyer acquires over many years of practice. Not only do experienced business lawyers have knowledge of the typical prices paid for assets, but they are also familiar with the myriad of non-price terms and conditions that accompany every transaction. Essentially, this non-public information is generally not known to anyone other than business lawyers, unless the transactions are sufficiently large to involve other professionals such as investment bankers. In terms of non-price information, an example of the kind of “market information” an experienced business lawyer would be aware of would be the normal range of money to escrow on account of a specific potential tax liability that could be transferred to the buyer, for instance, or more generally, what percent of the total purchase price should be escrowed to account for potential claims arising after closing. Other similar non-price terms would be the length of survival for representations and warranties.

An attorney with a wealth of market information from numerous actual and recent transactions will be one of the only sources of such information, as the terms and conditions of nearly all private business transactions are not made public. Also, with respect to non-price market information, that type of information is not typically held by business brokers or even investment bankers, who typically focus primarily on pricing, and not the non-price terms. While some non-price terms are negotiated at the letter of intent or term sheet stage of a transaction, many important and consequential terms are worked out through the documentation of the transaction, or come up in relation to due diligence that shows certain new issues not realized early in the transaction.