Tip of the Week: Watch Out for Time Pressure

A common practice with problem partners or shell owners involves insisting a deal must be consummated quickly.  In too many cases, the shell operator pressures a private company’s principal to ignore his attorney’s entreaties to ensure that full due diligence is completed.  “We have another candidate for the shell,” or “You know our shell is clean, what’s all this need for due diligence?” are common themes in deals.  Be suspicious of these tactics.

A letter of intent binding the parties not to discuss a possible transaction with others is the best way to go, giving both sides the appropriate amount of time to complete due diligence and negotiate a formal agreement.  Sometimes, if a real concern exists about locking in the shell, a good faith deposit in escrow, which is returned if the transaction ends, helps convince a shell of one’s serious intent.  Everyone wants to deals to be completed quickly, but legitimate players understand the need for focused, efficient due diligence review.

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