Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
Companies do better when attorneys are involved,
some owners say
by Elizabeth Martin When Chuck Dorsey took over as CEO of Plymouth-based Halo Innovations Inc. in 2003, he made meeting the company’s attorney, Dan Tenenbaum of Gray Plant Mooty, one of his first priorities.
“I don’t know whether other companies do this or not, but Dan is at every one of our board meetings,” says Dorsey. “Any communications I have with the board, he gets copied on. He gets our monthly financials, he gets regular updates that I send to the board.
“There's this constant flow of communication, so he's up to date with everything that's going on. And it's been that way since before I even got here. He has this intimate understanding of our company, our strategies.”
Founded in 1996, Halo produces sleep products for children and infants, which promote “safe and healthy sleep,” according to Dorsey. The company’s biggest-selling product is the Halo SleepSack, which is designed to keep infants warm at night and operates much like a sleeping bag.
Another product, a ventilated crib mattress that dissipates carbon dioxide buildup, was the company’s original product and will be relaunched in 2005. Today the company has $5 million in revenue and is profitable with 10 employees, along with several independent sales reps.
Although Halo has had four different CEO’s during its history, Tenenbaum, co-chair of the entreprenurial services group at Minneapolis-based Gray, Plant, Mooty, Mooty & Bennett P.A., says that his relationship with the company has been stable, and that’s the sign of a good client.
“I've never felt like, ‘Oh geez, who's this Chuck Dorsey guy and does that put my relationship at risk,’” says Tenenbaum. "I'm not really that wound up about the transition when it happens, so it’s kind of an organizational relationship. It's not just the CEO, it's not just the founder.”
“We've done several capital transactions where we've raised money and of course we've had our law firm and our corporate attorney intimately involved in that process, which is typical of anybody,” says Dorsey. “But I think one of the things that our attorney has always kept us very focused on, whenever you're raising money from outside sources it's really important to make sure you do everything correctly.”
“Correctly” means following SEC regulations and making disclosures. Dorsey says that some of the disclosures they made were mundane things that the company could have easily overlooked. But because they had involved Tenenbaum in Halo’s business on a regular basis, he knew of things that were occurring within the company that needed to be disclosed. That’s something that Dorsey values in his relationship with Tenenbaum.
Protecting value
Although having your lawyer foresee your every pitfall is ideal, many companies don’t involve their attorneys in their business on a regular basis because of the cost. In fact, for many small-business owners, calling their lawyer may be a last resort. After all, attorneys’ fees aren’t cheap.
Although Dorsey concedes the expense of regularly involving an attorney in its decisions, he says that it is money well spent. It helps that Tenenbaum’s firm sees it that way too.
“They see it as important enough to give us a discount, and it makes it easier for us to have them involved,” says Dorsey.
Dorsey suggests that business owners look for an attorney who aims for maximum involvement.
“When you’re running a smaller business, it's hard to spend discretionary money on legal fees,” says Joel Cannon, president of Golden Valley-based Cannon Technologies Inc. “At a certain point in your growth, you realize that that's money you need to spend strategically to better protect the value of your business.”
Cannon Technologies produces control systems for electric utilities and has “80 plus” employees, says Cannon. The company had $21 million in revenue last year.
Although Cannon is quick to point out that the company works with several different lawyers for its different needs, the company works with Jose Jimenez, a senior associate at the Minneapolis-based firm Patterson, Thuente, Skaar and Christensen for its patent and intellectual property issues.
When it comes to the cost of involving a lawyer in your business, Jimenez says that companies are treating their legal representation just like other vendors these days, sending out requests for proposals and looking for the best deal.
“A lot of law firms don’t want to play the game, but they have to play the game or they'll be forced out of that business,” he says.
For smaller business, this means that law firms are more willing to negotiate fees than they have been in the past.
“More firms today are willing to listen to that and find ways to get the job done,” for what the client is willing to pay, he says.
After the financial question is out of the way, cultivating that relationship is a matter of really keeping your attorney informed about what's going on with the business rather than just getting in touch with them every three months, or when a “legal” problem surfaces.
“Figure out a way to get them actively informed and involved in your business,” recommends Dorsey.
For those who think that having an attorney is a nice-to-have when starting a venture, AbbeyMoor Medical’s Chairman John Reid has strong words.
“Anybody that starts a venture that does not have an attorney that understands the needs of the entrepreneur and understands the blocking and tackling that has to occur to establish a company, I think he’s putting the venture at risk right from day one,” says Reid.
AbbeyMoor was founded in 1996 and produces the Spanner prostatic stent, which aids the passage of urine for men with enlarged prostates. Tenenbaum also serves as Miltona, Minnesota-based AbbeyMoor’s legal counsel. The company is in clinical trials with its product and has approval to commercialize the Spanner stent outside of the United States
Reid points out that everything from non-disclosure agreements, to working with outside vendors, to employee contracts, to starting your stock option pool are all issues that need an attorney’s involvement in order to be done well.
“To some extent you get what you pay for," says Tenenbaum. “Any person can go to the secretary of state's office and fill out their one-page form. But you really have done yourself and your company a disservice if you do it that way, because their form is missing things.”
Both AbbeyMoor and Halo execs say that their attorney is invaluable to their business strategy and is part of the companies’ inner circle. But what does it take to establish the kind of relationship?
“To some extent it comes with experience, to some extent it comes with the trust that develops within the relationship,” says Tenenbaum, who adds that companies have to trust that their lawyer will appropriately spend the company’s money on their time.
Tenenbaum also says that companies such as Halo and AbbeyMoor, which allow their attorneys to get involved with the business on an intimate level, get more bang for their buck.
“The less someone allows me to get involved, the harder it is for me to add the highest value for the time that I spend,” says Tenenbaum. “I’ve seen a lot of companies that are penny-wise and pound-foolish on legal services.”
“Spend a little time early with counsel to understand intellectual property issues and how they affect the business that you're in,” says Cannon. “Once we did that, the veil was lifted on patent law and what that could do for us and how we could use legal service to not only protect us but to keep us from infringing on others."
Companies that want to find an attorney who can become a business adviser as well as a provider of legal services need to network, agree Dorsey and Reid.
“You network,” says Reid. “You truly, truly have to network.”
Reid also recommends two sets of interviews for potential attorneys.
“It’s not the first meeting for me, it’s the second meeting. I meet with all of them twice,” he says. “And I’d want to know, do they remember what I told them about my business the first time?”
If prospective attorneys don’t remember much about your business, Reid suggests, they may not be interested in developing the kind of relationship you’re looking for.
Reid also recommends asking for references, from the kind of company yours is.
“Which clients did they have early on that were early, early, early startups and I’d want to talk to the founder of that business,” he says.
“And if there’s no reference forthcoming, it would be a short interview.”
[contact] Chuck Dorsey, Halo Innovations: 763.249.8210, ext. 20; cd*****@*************ns.com; haloinnovations.com. John Reid, AbbeyMoor Medical: 218.943.5116; jo******@**************al.com, www.abbeymoormedical.com. Dan Tenenbaum, Gray, Plant, Mooty, Mooty & Bennett: 612.632.3050; da***********@****aw.com; www.gpmlaw.com. Joel Cannon, Cannon Technologies Inc.: 763.595.7777; jo**@********ch.com, www.cannontech.com. Jose Jimenez, Patterson, Thuente, Skaar and Christensen: 612.349.5743; ji*****@****aw.com; ttslaw.com
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