What selling your business doesn't tell you until it's too late

Business owners preparing to sell tend to focus on one number: the price. But in my work with clients navigating a sale, I've found that the deal terms buried in the fine print, not the headline number, are often what determine whether a sale actually protects what someone spent decades building. In this excerpt from Chapter 6 of my book, The Private Equity Advantage, I share the story of one client whose real fear wasn't valuation at all.

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"What are your biggest legal concerns about selling your business?"

That was the question I posed to Mark over breakfast. Mark, at sixty-seven, was the kind of person who carried himself with quiet pride. He was lean with a youthful appearance, and his mind was as sharp as ever. For the past thirty years, he had built and run a home elevator company in North Carolina, one that operated mostly in commercial construction and high-end homes. His team was small – twelve employees in total. Among them was a capable second-in-command in his late forties, who owned 25 percent of the business and had gradually earned more responsibility over the years. The rest of the team consisted of longtime technicians, installers, and a few minority stakeholders who had joined him along the way.

Mark wasn't meeting with me because he wanted to retire. In fact, he insisted he had no plans to slow down anytime soon. What brought him to the table was something far more pragmatic. He had recently experienced a minor health scare. It wasn't life-threatening, but it was enough to remind him that planning was no longer a someday task. He knew the clock was ticking, and he wanted to take steps now to protect the value he had created while he was still healthy enough to lead negotiations, train successors, and choose the right exit.

Over the past year, Mark had entertained acquisition discussions with two potential buyers. One was a multinational conglomerate, a massive corporation with business units in manufacturing, real estate, and elevator installation. Their offer came with a tempting price tag, but the structure was vague and the cultural fit left much to be desired. The second was a domestic competitor based in the Midwest, roughly four times the size of Mark's company, but still founder-led and known for a hands-on, ethical approach. Their bid was slightly lower than the valuation Mark had received, but the team, the business model, and the long-term vision all seemed aligned with Mark's.

Still, Mark hesitated. His worries had little to do with valuation or tax implications. Instead, they centered on legal exposure. What if one of the elevators his team installed years ago failed, and someone was injured? What if the acquiring company cut corners post-sale, triggering client complaints that still bore his name? What if the deal was structured poorly and he remained liable for risks he no longer controlled?

Those were the questions keeping Mark up at night – and they're the same questions every seller should be asking before they sign.

What should you be asking?

The legal risks involved in selling a business aren't always obvious, especially to first-time sellers. Nonetheless, they are real – and they can have lasting consequences. As veteran corporate M&A attorney Chris Chediak explained to me, it's critical to think through the deal structure and the legal terms and custom practices that evolve constantly: “The market for what we ask for and get in M&A transactions shifts and changes over time.” That nuance, according to Chris, can't be learned from a template; it comes from living in the space.

Here are some essential questions to explore deeply at this stage of a potential sale:

• What are your biggest legal concerns about selling your business, both in the short term and the long term?
• Are there industry-specific regulations or licensing requirements that need to be addressed or transferred as part of the sale?
• What is the current market norm for liability caps, indemnification periods, and earnout terms?
• What mechanisms are in place if something goes wrong post-sale, such as a product failure, a customer lawsuit, or a regulatory compliance issue?
• How will you protect your employees, clients, and intellectual property during and after the transition?

According to Chris, these considerations have shifted over time. Liability caps that were once set at 20–30 percent, for instance, may now often be capped at just 8–10 percent. Survival periods for reps and warranties used to stretch for years; today they often match one audit cycle – usually twelve to eighteen months. Understanding what is customary now, not five years ago, is critical.

What you don't know can hurt you

Selling your business may seem like a financial milestone, but it's also a legal crucible. Underneath the surface of every deal lies a labyrinth of terms, disclosures, timelines, and traps – many of which can trigger liability for years after the ink has dried. This is the part most business owners underestimate. The legal contract isn't just paperwork. It's your insurance policy, your road map, and sometimes your last line of defense.

The legal complexity begins the moment you decide to sell. Due diligence alone takes months – buyers will want to comb through customer contracts, employee agreements, lease documents, financial statements, and tax filings. They will look for patterns, red flags, and exceptions. If they find inconsistencies, they will ask you to indemnify them. That indemnification is where the real exposure begins.

The legal landscape of M&A isn't static – it evolves. That's why you're much better off having a guide when navigating a major sale. There will be a mind-numbing number of balls in the air during a sale. I can't tell you how relieved you will be to have an extra hand when you need it. Unfortunately, many owners stumble before they even begin – either by choosing the wrong attorney or going it alone.

It's common for business owners to rely on a familiar attorney – someone who helped with real estate, accounting, or their estate plan. But that attorney likely isn't immersed in today's M&A norms. As Chris pointed out, a familiar attorney “may be loyal and smart, but they're just not calibrated for the current market.” A generalist may fight over irrelevant clauses, overlook red-flag provisions, or misread boilerplate language that's actually strategic. As a result, the deal stalls. Or worse, it closes with built-in landmines that you will only discover after it's too late.

A great M&A lawyer isn't just a negotiator. They are a decoder, someone capable of translating legalese into insight. They understand patterns, such as which representations and warranties buyers always try to expand or which indemnities to push back on. They've seen what works. And more importantly, they've seen what blows up.

This is an excerpt from Chapter 6, “Navigate Legal Considerations,” of Scott Hanson's book The Private Equity Advantage, which explores what it really takes to protect the value you've built when you decide to sell. To learn more or purchase the book, visit: https://scotthanson.com/the-book/