Deal Not Done Until….

July 8, 2014

A purchase or sale of a business is never complete until the wire clears. A business colleague of mine learned this very difficult lesson a few years back. He was less than 1 hour away from the closing to sell his company and the buyer’s transfer of funds. Just before the buyer’s transfer of funds, he received notice of a preliminary injunction order halting the sale due to claims asserted by a former partner. The buyer got spooked and walked away.

Last month, a similar situation occurred relating to the sale of International Vapor Group (“IVG”), an e-Cigarette (“e-Cig”) and vaporizer company with millions of online revenue and several retail stores. As IVG was in the process of closing the transaction worth in excess of $20 million, a former partner asserted ownership and other interests in IVG and demanded financial compensation relating to the sale. The assertions prevented the transaction. Now, instead of a completed sale, there is litigation.

I do not know the particulars of this dispute and whether IVG could have prevented this from cropping up on the eve of its sale. However, sellers should take heed and, as early as possible in the sales process, resolve all issues which could derail or affect the sale.

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