News & Insights

General BusinessApril 21, 2021by Stanton LawConsiderations for a Small Business Transaction in Georgia: Part 3

This is the third article of the three-part series outlining the basic considerations for both business acquirers and sellers when conducting a small business transaction. This article focuses on considerations of a transaction and how to mitigate risk. If you or your business is looking to engage in a business deal, Stanton Law offers its services to both the buy and sell sides of a transaction. Importantly, we offer the experience and resources required to complete a successful exchange.

Retaining Talent: Retaining talent is often a key consideration in any small business transaction. This is especially important in an asset purchase where an acquirer plans to renegotiate employee contracts. Employers may want to retain employees to preserve client relationships, intellectual capital, and the culture that makes the company successful. Additionally, it can be expensive to replace and retrain new staff. The first step in retaining key employees is to identify critical employees and critical business segments. Once key employees are identified, the next step is to determine retention strategies. Retention strategies may include offering the targeted employees financial incentives, benefits, alternative work schedules, or career development opportunities. Keeping open communication with employees and acknowledging their needs will help retain key employees during the disruptive transition period.

Corporate Governance: Corporate governance is the system or rules and policies by which companies are controlled and directed. Typically, a company’s board of directors is responsible for governing the organization and balancing the interests of the company’s different stakeholders. Strategic corporate governance reinforces transparency, security, and accountability within an organization’s leadership. Corporate governance plays a significant role in a transaction because the board of directors for both companies will be tasked with ensuring the transaction is a good deal. Having an attorney serve as a third-party legal guide eliminates the conflict of interest between shareholders and upper management and diminishes the risk that either party will enter into a bad deal.

Indemnification: An indemnification provision is a contractual remedy and risk allocation tool that clarifies which party bears the burdens of post-closing liabilities. Without an indemnification provision, buyers and sellers are left with limited recourse outside of pursuing a costly breach of contract claim. Indemnification provisions are often one of the most impactful and heavily negotiated provisions in a transaction. Having an experienced attorney working through the negotiation of complex provisions like indemnification is essential to closing a transaction without incurring exposure to intolerable risks.

Employment Law Considerations: An experienced attorney can also help you navigate the complex rules and regulations that may affect your business post-purchase. Once the transaction closes, businesses should conduct a review of all federal and state employment laws that may affect the business as well as review all employment policies and handbooks to ensure compliance. Two important examples of federal laws are the Worker Adjustment and Retraining Notification Act (WARN Act) and the Fair Labor Standards Act (FLSA). The WARN Act is a U.S. labor law requiring employers to provide employees with advance notice of facility closings and layoffs. The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employers in most business sectors. Having an attorney consult on the complexities of federal and state employment laws can help mitigate against potentially expensive employment issues down the road. Stanton Law attorneys frequently consult on the application of key employment laws and have extensive experience reviewing and drafting employment policies for small business transactions.

If you’re considering a transaction for your small business and want more information, Stanton Law attorneys are here to help.