Monday, April 27, 2009

Buying A Struggling Company

As the economy begins to show some signs of stabilization, there seem to be more and more news articles suggesting that there are going to be bargains available for those who wish to expand their current business through acquisition. Certainly, those seeking to sell their business are finding that the prices are not at the levels that they hoped. In an article on CNN entitled It's a Lousy Time to Sell Your Business, it is reported that both the number of businesses sold and the median price have dropped noticeably on sites such as BizBuySell. Those drops are likely to lead to bargains.

Assuming a struggling company has been identified as a target, what's next? An article on BusinessWeek entitled How to Buy a Struggling Company, offers some practical business suggestions such as sticking to industries that are well known to the buyer and concentrating on due diligence. In other words, the financial and operational details of the struggling company need to be carefully and thoroughly examined.

On the legal side of the house, additional concentration on legal due diligence is also warranted. Special attention to the contractual arrangements between the target and its suppliers and customers is needed. In reviewing these arrangements, the possibility of the failure or bankruptcy of key suppliers and customers should be factored into the review. Additionally, since the business is troubled, consideration needs to be given to determining what lines, offices, divisions, etc. will need to be shut down and whether there are any legal impediments to taking such actions. It may also be the case that, in order to keep a key supplier relationship, the buyer will have to pay a debt owed by the target, which would become a hidden cost of the transaction if not known prior to purchasing the target.

Insofar as the acquisition itself is concerned, there could be issues regarding the indemnification provisions typically included in the definitive agreement. Often, particularly with smaller companies, the owners of a struggling company are themselves struggling. This may mean that the indemnifications in the definitive agreement are of little value. Accordingly, it may be the case that a significant portion of the purchase price needs to be escrowed for a period of time.

Of course there are many other legal issues that have to be settled, not the least of which is whether the transaction is to be structured as a asset or stock purchase. However, that determination, along with many others, will need to be made on a case by case basis.

Friday, April 24, 2009

A Good Time to Buy?

A lawyer I know (Frank Aquila of Sullivan & Cromwell) recently wrote an article for Business Week entitled, "M&A: A Smart Strategy in a Down Economy." As Frank points out, mergers, acquisitions and divestures are key elements of corporate strategy. Just because markets are down does not mean that there are not deals worth doing or that a valuable management tool should be abandoned. History tells us that deals made during troubled economies often carry the strongest long-term returns.

Clearly, if an acquisition can only be financed with debt, today's climate may prevent the consummation of a merger or acquisition. On the other hand, if a company has available cash or can use its stock as currency, it should be actively considering targets, particularly strategic targets. Sitting on the sidelines, afraid to make a misstep, may itself be a terrible misstep. No one is suggesting that closing a deal will be easy, sellers are just as concerned about making a misstep and the due diligence investigation of the target needs to be exceedingly thorough. Still, there may be great targets out there that have a nice niche but are poorly managed or on the ropes with their lenders.

Tuesday, April 21, 2009

Tom McLain appointed to the Executive Committee of the World Chamber of Commerce

On April 16, 2008, Tom McLain was appointed to the Executive Committee of the Board of Directors for the World Chamber of Commerce (the "WCC"). Solange Warner, the WCC’s founder and president said, "We are so pleased that Tom agreed to be a part of our Executive Committee and look for to being able to tap into his enthusiasm and experience." The World Chamber of Commerce, based in Atlanta, helps member businesses with their efforts to achieve business success in the lucrative international marketplace and provides educational and networking between businesses located in the U.S. as well as to those located in other countries. For more information about the World Chamber of Commerce, please click here and for more information about the international law practice at Chorey, Taylor & Feil, please click here

Sunday, April 19, 2009

"Protecting the Crown Jewels: Trade Secrets and Non-Disclosure Agreements," by John Watkins

All business owners and executives, but particularly those with small and medium-sized businesses, should know the answers to these questions:

* What is the key confidential information that puts you ahead of competitors?

* What are the main risks of misappropriation of your confidential information?

* Are you aware that survey data indicate that a high percentage of ex-employees admit taking company confidential information?

* What is a trade secret is, what do you need to do to protect it?

* When should consider non-disclosure agreements, or NDAs, to protect your confidential information?

* What are the key provisions of NDAs?

* What other provisions are sometimes included in NDAs that may affect your rights?

* Why does "one size fits all" not apply to NDAs?

* How does trade secret litigation proceed?

* What are your potential rights and remedies in trade secret litigation?

* Why should you get professional advice in dealing with trade secrets and NDAs?

Trade secrets and confidential information truly are the crown jewels of many businesses. This is the information that allows businesses to compete effectively, and that provides a competitive edge. Most businesses must rely on protecting this information -- assuming they are, as they should, be proactively trying to protect it -- through trade secret protection and NDAs. Many businesses do not, for example, have the expertise or resources necessary to prosecute and manage a large patent portfolio, and not all types of information are susceptible to patent protection.

Despite the critical nature of this information, my experience is that many business people do not understand what they should be doing to protect the crown jewels. I repeatedly see posts on LinkedIn and elsewhere asking for a "form" or a link to a "free site" to get an NDA. Other times, companies will try to re-use NDAs that were developed for another purpose. Given the potential value of the information, this cavalier approach is surprising.

It was with this background that Tom McLain and I developed our series of podcasts on trade secrets and non-disclosure agreements. The podcasts are available free at or In the first podcast, Tom and I provide the general background regarding trade secrets and NDAs. In the second podcast, Tom goes deeper into the different uses and purposes for NDAs. For example, what works in the employment context may not work for a business transaction. Tom then covers the details of NDAs and their typical provisions. Importantly, Tom also covers some provisions that may appear in NDAs, and that, perhaps without you realizing it, can substantially affect your company's rights.

Throughout the discussion, Tom's underlying message is simple: One size does not fit all for NDAs. Truer words were never spoken. It is certainly worth the time and investment to get professional assistance in drafting NDAs, or in reviewing NDAs that you may receive from other companies. Professional assistance in drafting and reviewing NDAs need not be expensive, certainly not in relationship to the potential importance of the subject. Most importantly, it will provide you with the confidence that you know what you are signing and what obligations your company is undertaking and what obligations the other party is assuming.

In the final installment of the series, which has yet to be released, I will discuss the subject of trade secret litigation. Trade secret litigation tends to be much faster moving than other forms of commercial litigation, and puts an even greater premium on preparation than is ordinarily the key. I will discuss all aspects of trade secret litigation, from the initial investigation through trial.

Saturday, April 18, 2009

Karen K. Leach joins CTF as a Principal practicing corporate law

Chorey, Taylor & Feil, a Professional Corporation, is pleased to announce that Karen K. Leach has joined the firm as a Principal. Karen's practice includes the representation of corporations in various aspects of general corporate law and has particular experience in federal securities matters and mergers and acquisitions. Karen was formerly a senior associate with the Atlanta office of Paul, Hastings, Janofsky & Walker LLP, where she practiced in the same areas. Karen received her J.D. degree, cum laude, from Georgia State University in 1997. Thomas V. Chorey, Chair of the firm's transactional practice, stated: "The firm is delighted to add Karen Leach to our transactional practice. Karen's addition continues the firm's careful expansion in its key practice areas." Other recent additions to the firm include Evan Appel in January, 2009 and Tom McLain in May, 2008, both of whom joined the the firm as a shareholders.

Friday, April 17, 2009

Welcome to the Chorey, Taylor & Feil blog

Welcome to the Chorey, Taylor & Feil blog. We are an Atlanta business law and business litigation firm. We will be posting here regarding legal issues facing business and matters of interest involving our firm. Contact John Watkins at, or Tom McLain at