The $40 Million Deal That Collapsed Over Software Licenses

Rob Swartwood shares his journey from leading soldiers in combat to guiding business owners through complex mergers and acquisitions. With over 15 years of experience, Rob emphasizes the critical importance of engaging specialized M&A legal counsel early—ideally three to five years before an exit—to avoid costly pitfalls and maximize outcomes.

The episode highlights that selling a business is unlike any other transaction most owners will experience. Rob explains that generalist lawyers often lack the nuanced expertise needed for M&A deals, and that common pitfalls—such as aggressive tax accounting, incomplete contracts, non-assignable agreements, and overlooked legal details—can jeopardize or even kill deals. He illustrates this with a cautionary tale of a $40 million transaction derailed by unassignable software licenses.

Due diligence is described as rigorous and often reveals issues that can reduce the final purchase price. Rob urges business owners to be proactive, honest, and prepared, stressing that most of the value in a business lies in its intangible assets and contracts. He also discusses his approach to client screening, seeking coachability and trust to ensure clients can handle the emotional and practical challenges of a sale.

Key legal concepts such as representations and warranties, post-closing obligations, indemnification, caps, and baskets are demystified, with Rob explaining how these terms protect both buyers and sellers and why negotiating the definition of fraud is crucial. The current market is identified as a buyer’s market, making it even more important to assemble the right advisory team and avoid unfavorable engagement terms with large firms.

Rob’s core advice to business owners considering an exit: act now, build your team early, and trust expert advisors to guide you through a successful, regret-free transaction.