Ship-Shape Documents a Must to Smooth M&A
Franchise systems that fail to collect and store all their documents in an electronic database aren’t merely disorganized—they also may lose the deal altogether when a potential buyer comes to look at their firm.
So said a panel today covering due diligence during franchise mergers & acquisitions, at the International Franchise Association’s Legal Symposium in Chicago, which runs through May 6.
“You have to keep in mind that the due diligence process is a job interview for the general counsel, because we want to have top-tier management,” said Jeremy Holland with The Riverside Company, a private equity firm that buys growing concepts under $250 million in revenue. “You’re being evaluated, all of senior management is being evaluated. We want people that run a tight ship.”
Gaylen Knack of Gray Plant Mooty, moderator of the panel, said a deal recently fell through for a disorganized buyer, and Holland added oftentimes the price offered will decline. “You’re not changing your price because of disorganization, but because of exposure” to risks that can’t be answered by a thorough document review, Holland said.
Grayson Brown is senior corporate counsel for TBC Corp., which franchises Big O Tires and Midas, among other brands. “You need to help the franchisor have a system and procedure, to have everything in order,” he said. “I do an annual review” of all documents in the system, “because you have to be ready for a transaction on a moment’s notice.”