Navigating Sales Tax and Contractor Classifications in M&A

M&A deals usually involve a vast amount of legal fine print, and small oversights can have very costly consequences. To help you navigate this, CJ is joined in this episode by Trey O'Callaghan, a partner in Tech, M&A, and Emerging Companies at Goodwin. Trey breaks down the strategic role M&A lawyers play throughout the deal process in terms of both legal and business advice to help avoid costly missteps. The conversation explores when to involve legal counsel, issues like sales tax and contractor classification, and common deal-killers such as IP ownership and unresolved co-founder disputes. Trey also explains why earn-outs are the most litigated part of M&A deals and how to handle them wisely. The discussion touches on the personal implications of M&A deals for CFOs and how to negotiate adequate compensation. Trey also covers non-compete and non-solicit agreements, and the importance of understanding working capital fluctuations.

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LINKS:

Trey O’Callaghan on LinkedIn: https://www.linkedin.com/in/trey-o-callaghan-3196896a/

Goodwin:

https://www.goodwinlaw.com/

CJ on X (@cjgustafson222): https://x.com/cjgustafson222

Mostly metrics:

http://mostlymetrics.com

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TIMESTAMPS:

(00:00) Preview and Intro

(02:12) Sponsor – Navan | NetSuite | Pulley

(06:55) The Types of Law Trey Specialises In

(10:08) When a Company Should Engage With an M&A Lawyer

(16:52) Sponsor – Brex | Aleph | RightRev

(21:24) Deals That Have Fallen Apart

(24:15) Unpaid Sales Tax as a Common, Solvable Issue

(25:27) Issues With Contractors and How To Solve Them

(27:08) Problems With IP Ownership

(28:37) Co-Founder Issues

(29:43) The Most Litigated Part of M&A Deals: Earn-Outs

(34:30) Choosing the Right Plan To Use To Sell the Company

(37:11) Deal Fatigue

(38:36) The TLDR on Earn-Outs

(39:57) The Ideal Mindset for the CFO During the Deal Process

(42:33) When and How To Negotiate Compensation as a CFO

(47:55) Understanding Working Capital Fluctuations

(52:25) Non-Competes: How They Work

(56:34) Considerations for Non-Solicits

(59:51) Closing Words for Anyone Doing an M&A Deal

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