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Here are two recent transactions both with eleventh hour developments...

The first was a c. £2m refinance. On the face of it, our client was mortgaging a property. So a very simple question of registering a charge on the property in exchange for cash. Something you would think you can pick up and run with fast. In fact, within just under 100 minutes of receiving the pack of security documents from the bank’s lawyers (including a duty of care deed, personal guarantee, deed of subordination, assignment of rental income, company debenture, property mortgage, and legal due diligence requirements) I had reviewed for headlines and produced a 28 point response. To my dismay, nearly all my points were rejected. As is common, banking documents are generally non-negotiable. But, it still then took nearly 3 months before the transaction was completed. Why? Enter into the mix the variables: for the lender, their work is ‘as if’ they are buying the property (and a company which owns the property), so it takes time for searches and enquiries and then to satisfy various condition precedents. As more information is known further conditions arise. In this transaction, just when we thought everything was ready to close, an unexpected mini bombshell was delivered. We were required to provide the bank’s lawyers with a non-negotiable solicitor undertaking. With a solicitor undertaking the imperative is to only undertake what you can 100% deliver upon, as a failure to deliver is not only a breach of contract, it is a professional disciplinary issue. So if ever there is a time to be finicky, it is with a solicitor undertaking. The problem though was so much of the undertaking was out of our control, so as a matter of principle, 100% we refused to enter into it unless it was heavily amended. Now the deal spotlight turns to us as the acting lawyer. Perception is everything. Immediately it now looks like it is us blocking a deal and being difficult… and that is not good for client relations! Happily, after some high-level “bank v corporate” lawyer horn locking, the completion process and therefore undertaking was restructured. So we got there averting the eleventh hour drama.

The second was a purchase of a small single-site health clinic. As sometimes happens, the twin tracks of the business and property legal work were running at different paces. The business aspects were done and dusted with the property process significantly lagging. Then, when all the ducks were pretty much all lined up in a row, at the eleventh hour our client withdrew. Why? During the transaction, our client had lost some key staff and there was also a question of whether a key member of staff in the target business team would be leaving. In the current climate, recruitment has been difficult in the industry and therefore the acquisition turned into a decision, not of money, but of time and stress. For our client, aborting was the right outcome. Usually, on an acquisition the key imperative is executing the work with alacrity. In this matter “but for” the lagging legal property work process, the acquisition would likely have already completed and then the HR issues would have been a fait accompli. 

Are there lessons from these outcomes? 

My advice to clients, whether selling or buying, is to assume two outcomes. First, the deal completes. Second, the deal aborts (and at any time for any reason with or without notice). So plan and prepare accordingly.

Contact our Commercial Lawyers in Enfield, Finchley, North London and Hertfordshire today

If you are looking to sell or buy a business, or enter a joint venture, our commercial team would love to help. Please get in touch. 

Written by Spencer Laymond