Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

entrepreneur.com

Post reply on HN
Print view View original

41–49 of 49 posts

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#41

Post by smcin »

tptacek wrote: post #36
smcin wrote: post #34

Earlier quoted context omitted.

What about all the people who don't have a normal contracts counsel?

Look, at the point where you're selling a company in a multimillion dollar transaction, some of these excuses go out the window. Get a lawyer, and then ask your lawyer for a referral to an M&A practice. Company acquisitions are a shitload of specialized work; it's honestly weird for me to hear that a general practitioner handled this person's earnout contract.

It's not an "excuse". I'm surprised that you've never seen bad lawyer referrals. You honestly haven't? (and I'm not talking about general practitioners).

I've also seen a (pedigreed) General Counsel that sank a tech company.

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#42

Post by giomasce »

hluska wrote: post #10
blackeyeblitzar wrote: post #6

Earlier quoted context omitted.

What I don’t get is even in the absence of capitalization wouldn’t the default interpretation be whatever the prevailing reasonable meaning would be?

In legalese, there is a massive difference between proper and improper nouns. Capitalization matters a tremendous amount.

How do you write a noun that is not meant to be capitalized but happens to be place just after a full stop?

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#43

Post by hluska »

smcin wrote: post #31
hluska wrote: post #17

Earlier quoted context omitted.

They chose the wrong counsel - they went to a general practice firm as opposed to finding a lawyer capable of navigating 1 - 3. A lawyer may be great at holding little old ladies’ hands while preparing their wills. That does not mean they’re qualified to deal with PE.

Can you give more constructive advice on how to find a lawyer that both can draft a non-trivial agreement with PE, and is affordable? What specifics do you look for?

First off, it’s healthy to temper your expectations. “Affordable” is very much a relative term. You can find general practice attorneys who can do it, but they can make half million dollar mistakes as in the source article. It might have been an $800 or $1000 difference an hour, but you can get a lot of those hours for $500,000. I’d expect to pay more than any reasonable human would charge for an hour of their time. It sounds negative (and it is) but this is about health.

You’re looking for a highly specialized practitioner with practical M&A experience. I’d start with my regular counsel (aka the person who does things like terms and conditions, contracts and the like) and ask for a referral.

It’s also really useful to ask people who work in the same field as you and who have been through an acquisition. I wouldn’t necessarily trust them for a skills based referral (ie - Lawyer A performed wonderfully) since they’re likely not lawyers and you often won’t know you got bad advice for years. But I would trust their opinion on things like how the attorney communicates and manages the entire process.

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#44

Post by hluska »

smcin wrote: post #41
tptacek wrote: post #36

Earlier quoted context omitted.

Look, at the point where you're selling a company in a multimillion dollar transaction, some of these excuses go out the window. Get a lawyer, and then ask your lawyer for a referral to an M&A practice. Company acquisitions are a shitload of specialized work; it's honestly weird for me to hear that a general practitioner handled this person's earnout contract.

It's not an "excuse". I'm surprised that you've never seen bad lawyer referrals. You honestly haven't? (and I'm not talking about general practitioners). I've also seen a (pedigreed) General Counsel that sank a tech company.

Honestly pal, if you’re in a position to sell a company for the kinds of dollars that PE deals with, you needed a lawyer a long time ago. I understand that they’re expensive, legalese is intentionally difficult to understand and lawyers aren’t builders so they’re not worth funding. I understand those excuses because I’ve used them.

But you needed a lawyer a long time ago. If you actually don’t have someone who deals with contracts, terms and things like that, fix that first.

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#45

Post by hluska »

gamblor956 wrote: post #26
hluska wrote: post #10

Earlier quoted context omitted.

In legalese, there is a massive difference between proper and improper nouns. Capitalization matters a tremendous amount.

Capitalization matters very little in legalese, but punctuation is king. This is because, unlike with punctuation, capitalization was not (and still is not) consistent across legal documents. Some people/firms use all caps for defined terms; others standard capitalization, and many don't capitalize at all on the grounds that a a defined term is not a proper noun unless it is a person, place, or thing.

In the article, the author lost half a million over capitalization. Using just that example (because it’s what we’re talking about) explain how it matters very little.

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#46

Post by hluska »

giomasce wrote: post #42
hluska wrote: post #10

Earlier quoted context omitted.

In legalese, there is a massive difference between proper and improper nouns. Capitalization matters a tremendous amount.

How do you write a noun that is not meant to be capitalized but happens to be place just after a full stop?

You capitalize it, just like you did with the first word of that sentence. That’s because it is an improper noun. My quote was:

“In legalese, there is a massive difference between proper and improper nouns.”

Do you understand or would you like more help?

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#47

Post by gamblor956 »

pottertheotter wrote: post #30
gamblor956 wrote: post #28

Earlier quoted context omitted.

I work for a company that does a lot of acquisitions. Basically all of our acquisitions involve earnouts, and they're never a bad deal for the sellers. In many cases, without the earnout the deal doesn't happen because the price the seller wants is higher than we'd be willing to pay unless the continued performance of the business post-acquisition justified the higher price tag. But whether earnouts are good or bad f…

All of the horror stories I've heard from others about earnouts involved "companies with real revenue streams, established histories of revenue, and non-tech business models that don't require exponential growth or 'scale'". There's so many ways that even the most "straightforward" of earnout terms becomes non-straightforward.

There's so many ways that even the most "straightforward" of earnout terms becomes non-straightforward.

There really isn't, if both parties are active businesses. If you look closely, you'll quickly realize that almost all of the horror stories involve private equity, because they ruin everything.

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#48

Post by gamblor956 »

hluska wrote: post #45
gamblor956 wrote: post #26

Earlier quoted context omitted.

Capitalization matters very little in legalese, but punctuation is king. This is because, unlike with punctuation, capitalization was not (and still is not) consistent across legal documents. Some people/firms use all caps for defined terms; others standard capitalization, and many don't capitalize at all on the grounds that a a defined term is not a proper noun unless it is a person, place, or thing.

In the article, the author lost half a million over capitalization. Using just that example (because it’s what we’re talking about) explain how it matters very little.

No, the author did not lose any money over capitalization. The author did not understand that capitalization was irrelevant.

What was relevant was that the author failed to properly disclosed a "connected person" as defined in the legal agreement. The law he was referencing would have done nothing to address/correct his failure, regardless of the capitalization used.

Re: Lessons from a Private Equity Earn Out: How I Lost £550K Due to a Lowercase 'C'

#49

Post by giomasce »

hluska wrote: post #46
giomasce wrote: post #42

Earlier quoted context omitted.

How do you write a noun that is not meant to be capitalized but happens to be place just after a full stop?

You capitalize it, just like you did with the first word of that sentence. That’s because it is an improper noun. My quote was: “In legalese, there is a massive difference between proper and improper nouns.” Do you understand or would you like more help?

Your quote is also: "Capitalization matters a tremendous amount". But at least in some positions capitalization is mandated by grammar rules. So, when a noun should appear in such a position (e.g., just after a full stop), how does one distinguish between its two forms (capitalized and not capitalized)? There should be a way, if that "matters a tremendous amount".
Post reply on HN