July 10

How One Client “Earned” Six Figures by Not Doing a Deal

As a business attorney who has also personally grown, sold, and purchased businesses, one of the first things I tell my clients is that sometimes the best deal you will ever make is the one you don’t make.

I recently I represented a client in the purchase of a technology business, and they client engaged with me after making a non-refundable deposit. When they called they were just about to sign a purchase agreement and wire an additional six-figure deposit to the seller.

While the client told me they had run a background check online on the seller prior to making their first deposit, I started with a check of my own and quickly discovered that the seller’s entity was suspended in California.

After making a connection between the seller’s current entity and several previous entities I found two cases filed against the seller for breach of contract and fraud. The facts in both cases turned out to be strikingly similar to the current transaction, but because one had settled and the other had gone to arbitration there was no record of a judgment in the online background check my client had run himself.

My client was preparing to wire the additional six-figure deposit to the seller when I reached them with the bad news.

Fortunately, they stopped the transaction and rescued the deposit funds shortly before they would have been lost forever.

While no one starts a transaction hoping for a result like the one my client had, sometimes the best deal is the one you don’t do. They were not happy to lose their initial deposit, but the client was thrilled that they had dodged a six-figure bullet– as well as the cost and time of the years of litigation that would have likely followed.