More Troubles

Roy: Financials. The company you are going to be reviewing has to have good solid, traceable, provable financials.

When you are basing your decision during the due diligence period on the tax returns the broker, CPA or lawyer should advise you to and ask the seller to sign an authorization for the IRS to send directly to you certified copies of the tax returns of the company and the personal tax returns of the sellers.

You saw the tax returns I showed you earlier. Those are very easily modifiable.

The only way for you to get real copies of what they filed with the IRS for that the seller is to get certified copies from the IRS by signing a special form. It's going to cost you $49 per year per tax return. If you want 3 years and those same 3 years in corporate tax returns it will be 6 times $49. You send a cheque to them and then the IRS will take anywhere from 1-5 months to send you that.

However, it's an indication for you to gauge the seller. If he wants to sign that and is happy to sign that, but you get different tax returns from what you received during the due diligence process, you won the case there if something goes wrong.

Now if he says 'No, I'm not going to authorize the IRS to send you copies of my tax returns' but he gave you copies, there is a discrepancy here. The thing is, I can file a tax return today saying I made a $1,000,000 and paid $250,000 in taxes and then tomorrow morning file an amendment saying that I only made $100,000 send me back my $250,000 and the IRS will do that. But I'm going to give you the bigger one; that has been done, it is done every day.

It's another one of those mines you are going to be stepping on. So you have to be very aware of those things.

You have to be defensive and your broker has to protect your interests, not representing you fully, but protecting you.

You are coming into this country, you are learning even the language. The lawyers will not protect you at that level because they are not here to be your advocate or be the advocate of the transaction like we are not a representation.

Caveat. Don't deal with a single agency broker.

The single agency broker is not working for the buyer. They fully represent the seller, the law obligates the broker to screw the buyer. This is in plain English ...they use the word screw in that sense? The law would require me if I was a single agent to represent the seller.

Tom: Single agent is then an agent for the seller?

Roy: Whoever contracts that broker; I can be contracted as a single for a buyer and be ok. I would have to represent that buyer from the UK.

However, I am obligated by law to screw the seller on behalf of my client in the UK.

They become my clients not my customers because I am a non representation broker. I don't represent either one. I represent the transaction.

I have to make sure the transaction is crystal clear, straight down the middle, equally beneficial for both. I have to disclose anything and everything I know about the business. Not about the seller personally but about anything that can affect the value and desirability of the business.

That is my personal goal. I'm not going to withhold any information.

I would rather kill a deal rather than make a shady deal for seller and buyer where he's going to be in disadvantage. Now if he feels that he is going to be in disadvantage and I explain that and he's still OK and says that's fine, it is part of the negotiation process.

Some people say I will offer $100,000 less to take advantage of him and he takes it, he's happy with it why not?