Steven Fuerst of law firm Lowenstein Sandler is well-versed in mergers and acquisitions and business divorces. He has seen it all in a 30-year career.
“When economic times get tough, any imperfection is magnified,” he explained. “And any perception that someone is not producing becomes more pronounced because there are less profits to divide up. In addition, entrepreneurs are accustomed to having their own way. When external factors invade that province, there is more likely to be a business divorce.”
“The problems,” said Fuerst, “arise due to a lack of understanding regarding the rights of all parties or one part of a business becoming more profitable than another and so forth. When a firm is seeking our advice, the principals usually have individual counsel. Typical business divorces usually have more elements than just a transfer of money. We hope the parties come to a firm such as ours in time to salvage the firm. The ultimate win situation is to have a negotiated arrangement whereby each side is left with something; as opposed to protracted litigation which can lead to substantial legal costs and a negative impact on the entity itself.”
Fuerst tries to avoid having a court battle between the parties. “We achieved a pre-litigation settlement on behalf of the majority owner of an employee leasing company amidst allegations of tax fraud and other allegedly wrongful conduct. We also represented a 50% shareholder of a commercial audio/visual company in the dissolution of the business, which resulted in each 50% shareholder retaining a portion of the company We also advise our clients not to do anything negative regarding the business that would be held against them in court.”
Family issues come into play as well. A divorce or disagreements between different factions of the same family are two examples of the personal; not financial side of a business divorce. The New York Yankees are a case in point. Both Hal and Hank Steinbrenner had to determine who would be the face of the team after father George was no longer ‘The Boss’ of the franchise. The issue was settled with minimal distractions on the field. And a Steinbrenner son-in-law was divorced and lost his position as an executive with the team.
Finally, if the parties involved want to sell the company, legal counsel can help. “A firm such as ours can direct the parties to investment bankers and the like who can move the process forward,” said Fuerst.
