Buying or Selling Alarm Companies Need Not Be Complex

Whether you’re selling or buying alarm companies or alarm subscriber accounts, it shouldn’t be a stressful and complex transaction. You’re not the first seller or buyer. These transactions arise all the time. There are several levels that these deals typically fall: less than $500,000; between $500,000 and $5 million; and in excess of $5 million. There is one other category — those deals that involve bank or lender participation and those that don’t.

You should be able to read and understand the contract between seller and buyer. Not most of it, all of it. If you can’t understand your own contract or require explanation from your attorney, then my advice is to get rid of your attorney. Get one who writes in English using terminology easily understood by a person of normal intelligence. There is no need for Latin terms or legalese only understood by lawyers. It’s your agreement and it should be expressed in terms you would use and you can understand.

There is also no need for 20 or more pages. Maybe it’s just one of my quirks, but you also don’t need a definition page; use terms that are commonly used in the alarm industry, not those that require a glossary. For example, we all know what “accounts receivables” means. But what does “qualified accounts receivable” or “qualified subscriber contract” mean? I don’t know about you, but I hate reading a document that requires me to look to two or three other paragraphs to figure out what’s in the paragraph I am reading. These unnecessarily complex contracts are not more thorough or comprehensive; they’re just poorly written. They are designed to multiply the pages to beef up the legal fees.

Here’s what you need to figure out in order to get your deal into contract. The multiple that’s being paid; which contracts will be purchased and which will be excluded; the payout (cash less holdback or cash and payout with note held by the seller); the guarantee period; and if there will be replacement accounts. Yes there are a few other issues, all of which are routine for any lawyer who claims to be an alarm lawyer.

Lawyers aren’t always the problem. Sometimes clients are unreasonable. But even then it’s the lawyer’s job to let the client know what’s reasonable. A client who insists on uncommon terms or being unreasonable can expect excessive legal fees and probably the loss of the deal.

Although the smaller deals deserve the same attention and will cover most of the same issues as those in the $5 million and below range, clients understandably do not want to spend much on legal fees for the smaller deals. I generally streamline the process under those circumstances. The majority of deals will fall within the $500,000 to $5 million range. If there is no bank or lender involvement, the deal should be relatively straightforward, with your counsel fees falling somewhere between $2,500 and $3,000. If a bank is involved the counsel fees can increase significantly because the lender may request many provisions that would not really be of concern to either a buyer or seller.

If you’re lucky enough to have a deal for more than $5 million, there will likely be a few issues that need to be addressed. But again, even you aren’t the first deal like this to come along.

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About the Author

Ken Kirschenbaum
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Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.

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