The Benefits of Getting an Attorney Involved Early in the Deal Process

The Benefits of Getting an Attorney Involved Early in the Deal Process by Aimee B. Davis{3:24 minutes to read} In October’s blog, Is a Letter of Intent Necessary in an M&A Transaction?, we suggested getting an attorney involved early in the deal process, even prior to finalizing a letter of intent. However, in transactions where there is no letter of intent, when is it appropriate to involve your attorney in the deal process?

In a matter recently referred to me by Larry Cohen, Partner-in-Charge, Business Management Hospitality Group Leader at Marks Paneth LLP, a potential client was interested in retaining both Larry and me to serve as trusted advisors in connection with the acquisition of an equity interest in an existing medical practice. As a physician, this client had the good sense to seek legal and other professional assistance early on because he had no experience with equity transactions. (Do Your Clients Consider You to Be a Trusted Advisor or a Scribe?)

Most states require that medical practices have a licensed physician as a shareholder. The client explained that, rather than putting in actual cash, he would simply join the practice. By becoming a shareholder, he expected to share in the upside of the business. In addition, by virtue of his being a physician, he would satisfy the requirement that the medical practice have a licensed MD as a shareholder.

Upon hearing this, I became concerned that if the practice had been operating without a licensed MD during any portion of my potential client’s pre-ownership period, such failure could result in penalties, fees or other damages, for which my client would be proportionately responsible, simply by virtue of becoming a shareholder.

The question then became whether a deal could be worked out in which my client would be fully indemnified for the pre-ownership period. Had the client moved forward with the proposed deal without first conferring with us, he could have been exposed to otherwise avoidable problems.

The client benefited from having consulted with us before entering into a definitive agreement because our experience enabled us to recognize potential pitfalls of the proposed structure before he invested a significant amount of time and money. Had he not contacted us ahead of time, he might have found that he had agreed to things that were not in his best interest. Even if he had been asked to enter into a non-binding letter of intent, if he had agreed to certain provisions that needed to be changed later, it would have put him in a precarious negotiating position and/or caused the entire deal to crater.

Clearly, it’s better to get your attorney involved on the front end of any deal, rather than after the fact.

Aimee B. Davis Law P.C. is committed to advising its clients and resolving issues relating to the legal and business matters that are important to them. If you have any questions, please feel free to contact us at (917) 617-2243 or email

Aimee B. Davis
Aimee B. Davis Law P.C.
122 Ashland Place
Brooklyn, NY 11201

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