BuSo.. Am I Getting Screwed On A 7-Figure Deal?

[blackwar85]

Hello all,

Would love to get insights from all of you on the following problem. Especially those who have experience with high six and low 7 figure exits like @Tavin , @MrMedia , @stackcash , @eliquid

Short version:

Is it the standard of the industry that after the date of signing an asset purchase agreement ( APA ) all the revenue I earned to my affiliate accounts before the buyer replaced the affiliate links should be transferred to the buyer when the affiliate networks pay these earning out to me?

In other words, after the APA signing date, all the earnings from the site during the migration process belong to the buyer?

Long version:

After signing APA we have been transferring domains, files and helping them apply to affiliate networks and programs. Suddenly among regular discussions broker mentions that there is such thing as a cutoff date. All the revenue after the APA was signed goes to the buyer even if it is earned to my affiliate accounts.

The site has earned around $1x,xxx after signing of APA. All of it to my affiliate account, which will be paid out to me. According to the broker if I receive the money from affiliate networks it's the buyer's money and I should transfer it to him. There are no mentions in the APA about me paying out these earnings to the buyer after I receive them or anything even remotely related to that.

Broker keeps repeating to me that we should proceed in a good faith and the buyer has been working hard to migrate the business. Broker mentions that the cut-off is a standard of the industry.

Any help on this would be greatly appreciated! Thanks guys.

 

[Philip J. Fry]

You're complaining over, at most, $19,999 in a X,000,000 deal.

What's wrong with you? Listen to your broker, especially if you want to sell another business with him in the future. You're making his job harder than it needs to be.

And, no, he's not lying to you just to screw you over, in my opinion, as someone who didn't do a 7 figure exit. However, all of the revenue after the cut off date goes to the buyer, per the contract. This is in general and it doesn't matter if it was in his affiliate account or your affiliate account. It just takes time to register affiliate accounts, update affiliate links, and so forth.

Be cooperative.

 

[MrMedia]

In a word - yes, standard practice. Reconciliations happen once inspection has completed and monies are about to be paid.

 

[Ryuzaki]

Is it the standard of the industry that after the date of signing an asset purchase agreement ( APA ) all the revenue I earned to my affiliate accounts before the buyer replaced the affiliate links should be transferred to the buyer when the affiliate networks pay these earning out to me in 2 months?

Yes. All of my liquidation events have worked this way, enforced by the affiliate networks that knew about the sales because we had to sign up the buyer's accounts and get them fast tracked to be approved instead of doing phone and video interviews and all that crap I had to do.

Let me state it clearly because I felt confused reading what you typed.

If you earned $5k in December, agreed to sell in January, then got paid the $5k in February, then that $5k is yours. It was earned before the sale was agreed upon and paid for.

If you earned $5k in January after agreeing to sell but before the buyer was able to switch out to his own affiliate links, then that $5k is theirs. They bought the asset AND the cash flow. The money goes to them, and it's fair and square.

 

[CCarter]

The real question is why you didn't have lawyers look over a 7 figure transaction, this is like the first thing they would have outlined. You would know exactly when the money is theirs and when it is yours.

 

[Philip J. Fry]

The real question is why you didn't have lawyers look over a 7 figure transaction, this is like the first thing they would have outlined. You would know exactly when the money is theirs and when it is yours.

He’s too stupid to cough up the $250 for an hour consultation like how some business owners are too stupid to cough up $550 for an hour with a tax attorney. Attorneys are worth their weight in gold.

 

[mrpotato]

Did the buyer not request a reconciliation schedule or at least an A/R schedule that's tied to the asset(s) being sold? Whether you're operating on a cash or accrual basis, there is most likely always some post transactional events that need to take place in one aspect or another. Yes, this is customary. The CPA and Attorney should have ironed this out for you.

 

[bernard]

What do you do if a buyer doesn't change their links though?

I've gotten commissions from sites I sold years ago. I told them about it of course, but sometimes people don't care.

 

[Philip J. Fry]

What do you do if a buyer doesn't change their links though?

I've gotten commissions from sites I sold years ago. I told them about it of course, but sometimes people don't care.

You answered your own question. They didn’t care. It’s from the definition of “good faith” in contract law.

“In general, the duty of good faith and fair dealing means, for example, that parties cannot evade the spirit of the bargain, lack diligence or slack off, perform incorrectly on purpose, abuse their power when specifying the terms of a contract, or interfere with or fail to cooperate in the other party’s performance.” from https://www.americanbar.org/groups/...ractice/2016/duty-of-good-faith-fair-dealing/

They shouldn’t have been slacking off. Enjoy the money. It’s your money now. You even told them.

 

[CCarter]

I told them about it of course, but sometimes people don't care.

Make sure you document every time you sent them an email, message, and phone call reiterating in clear language that they need to update the links and missing commissions. Ironically it can go either way in court. Some can see it as you stealing- if you don't have the documentation, another group of jurors can see it as their fault and giving you free money.

The key in any situation is to document over and over to cover your ass. IF they come for you the documentation will make it an open and shut case. I'm overzealous, I'm talking about once a week for a year trying to get them to update the link.

 

[Philip J. Fry]

Make sure you document every time you sent them an email, message, and phone call reiterating in clear language that they need to update the links and missing commissions. Ironically it can go either way in court. Some can see it as you stealing- if you don't have the documentation, another group of jurors can see it as their fault and giving you free money.

The key in any situation is to document over and over to cover your ass. IF they come for you the documentation will make it an open and shut case. I'm overzealous, I'm talking about once a week for a year trying to get them to update the link.

I wouldn’t go as far as call them once a week but they really do get you with documentation. I’m talking about business law or tax law or contract law or even immigration law! Haha make sure your documents are in order!

 

[bernard]

I don't think this would go to court here in continental Europe.

We're generally more "common sense" based in our law.

Contracts are 3 pages, not 300.

 

[Philip J. Fry]

I don't think this would go to court here in continental Europe.

We're generally more "common sense" based in our law.

Contracts are 3 pages, not 300.

It’s really this. I do business with Spaniards. At the end of the day, the contract is whatever the party agrees to, given some constraints such as social conventions. For example, there can’t be a slavery contract, even if both parties agreed to it.

The only people who follow contracts word for word are Germans; but then, you know you will get exactly what is on the contract.

There’s a really good book called Shake, Bow or Kiss or something like that. It’s a book about international business. It clears up misconceptions really well. For example, Spaniards want to renegotiate yearly based upon their feelings and you can too if you’re in a contract with them! With a German, once you’ve consented, you’ll get exactly what was offered.

 

[bernard]

Yes, this really is very different from country to country.

 

[blackwar85]

Thanks for all the answers! Especially @MrMedia and @Ryuzaki for sharing their concrete experiences. Also to @Philip J. Fry for putting things into perspective.

I think the answer here is obvious and I will proceed with agreeing to the cut-off date. So, that part of the question is dealt with.

I think that now that I know what's the right action to take in the situation the discussion will turn into theorizing about "what ifs" and "buts" and where something meaningful can be only figured out by actually contacting an independent lawyer. However, I will go a little bit further just for the sake of entertainment.

@CCarter and @Philip J. Fry brought up another part of the question. What are actually my legal rights and why I did not contact a lawyer? To foster some discussion I can provide additional info in hopes that someone finds this interesting.

I'm using a broker. Their lawyers drafted the APA. There is no "reconciliation schedule or at least an A/R schedule" requested by the buyer, agent or put forth in the APA or any other contract.

If I would have asked the independent lawyer to review the APA before signing it and it would have raised the issue of reconciliation then I'm sure the reconciliation terms would be added to APA that follow industry-standard practices. I would have no problems with that.

Now that the APA is in set with no "reconciliation schedule or at least an A/R schedule" or any mentions of it I can still contact a lawyer and ask what is my legal right and follow through with whatever advice I'm given because APA is signed by all parties.

Of course, I am not interested in contacting a lawyer at this point because I want to close the deal and I respect industry-standard practices.

Anyway, thanks for the thoughts! I will try to make a review of the entire selling process with the broker after the site is successfully sold to give something back.

 

[CCarter]

I feel like a lot of this is naïveté. If you have never been fucked before then you'll think "I trust this guy, he has the interest in BOTH parties winning" - but only one side is paying for the lawyer so - logically that cannot be.

"The party that draws up the contract wins." - Dan Peña​

The side that draws up the contract can simple state "make it fair, but favorable to me."

Think about the worse case scenario where you go to a jury trial. Some old lady on one side with no lawyer, and some big goons on the other with 3-4 lawyers that were sitting at her kitchen table asking her to sign some contract. She can say:

"They didn't allow me to have a lawyer"

"They took advantage of me"

"They intimidated me"​

In the eyes of the jury this little old lady versus the goons - the jury is going to side with the little old lady (OP in this scenario) cause of emotion. They drew up the contract, "she didn't know what she was signing", bla, bla, bla.

That's why in any business transaction you have to insist that the other side have legal representation present or review what's being signed. Cause it happens, you, @blackwar85, can literally go and fuck these guys over with: "I was taken advantage of, they strong-armed me, and they didn't allow me to have a lawyer" - and the jury WILL listen. Whether you win or not, at least you have a fighting chance.

Just because something is industry standard doesn't mean that is the correct way of doing things.

In affiliate marketing it's industry standard to scrub leads and shave. Basically for the affiliate network to make their money they shave 20% or more of the converted traffic - basically robbing you and say "you didn't make a sale", and pocket the money.

That IS industry standard.

And since you guys never fight it stays industry standard until someone says: "hey assholes - that's robbing us."

When you do a transaction you need to have a lawyer present and you shouldn't be signing SHIT without a lawyer at the very least review what's in the documentation. YOU ARE NOT a legal expert.

Lawyers are not GOOD GUYS. They are on the side of the person that's hiring them. They will throw shit into the agreement knowing that you are never going to go for it cause it's ridiculous just to fuck with you.

Recently there was a situation where the SBA (Small Business Administration) tried to get someone to put up 25% equity (un-heard of) for a government-backed loan AND have criterial like a 'world-wide asset sweep' of all generated revenue to back the loan, along with cross-collateralized assets - shit that's literally ILLEGAL for SBA loans in certain states. Crazy crazy shit. Just listening to the story makes you shake your head.

If the person didn't have a lawyer to state, to the fucking SBA - a government agency, "hey assholes, this is illegal according to YOUR OWN laws and regulations", the person would have signed the deal without even realizing what was what.

The SBA grunts were just making shit up without even consulting their own legal department AND since very few people fight or consult a lawyer and just agree to anything placed in front of them, they are used to steamrolling to get their way. EVEN when the terms they are laying out are literally against THEIR own laws, rules, and regulations. WTF.

Shit like that goes on every single day.

AND lawyers and accountants make mistakes ALL THE TIME. That is the whole point of having someone cross the Ts and dot the Is.

"Rivers are crooked because they take the path of least resistance"​

You took the easiest way, and maybe this works out for you, great. Maybe the next 5 deals works out for you without a lawyer, okay. But one day you OR someone reading this is going to get fucked cause they didn't have a lawyer present at a major transaction.

All the people that get thrown out of their company with no money, or lose millions on deals, or just get fucked in business usually have one thing in common - they didn't have a basic lawyer look over what they were signing and got fucked. They trusted the other side.

It's very basic protection. It's like putting on a seat belt when you get in a car.

"But this is a small transaction" or "This is just a website" - I know how you fuckers think. Doesn't matter, what happens if the new site owner gets sued for slander cause of something written by the previous owner's writers, who's going to pay? The new site owner comes after you for the damages and you are sitting there with your dick in your hand cause you didn't bother having a lawyer.

If you guys have never gotten fucked, I mean really fucked before, then you'll think this is overkill. For anyone that has gotten fucked they know this is basic AND they'll never do another transaction without a lawyer present.

If anyone is telling you not to involve your own lawyer it's cause they KNOW that if you do then it will involve in them having to give up some concessions. Why else would they tell you not to put on your seat belt?

 

[Philip J. Fry]

@blackwar85 who drafted the contract? Was it the broker? If so, the broker just used the same contract he uses with every client.

@CCarter Speaking like a typical American. Here's the section on the US, for your own self-enlightenment. The problem you're talking about, the bureaucratization of business contracts by lawyers, is a uniquely American thing. While everyone should have an attorney review contracts for them, which only costs $250 or so, it's not needed if you're negotiating with people from other cultures or, at least, shouldn't be your first course of action. They might be offended by it, interpreting it as arrogance or rigidity or uncooperativeness. Also, the common complaint, of overseas contractors being incompetent, not working, etc is in large part due to the cultural difference. Also, enforcing contracts over international borders is ridiculous and unrealistic. It's just better to have good relationships.

For example, with Turks, you can give them a contract to sign with deadline and such, and they will sign it, but it means nothing. Their government is corrupt and doesn't work that way. They value the relationship more. You have to discuss with them one on one, as if you're in a Bazaar haggling over the price of spices. You specify the conditions based upon the discussion and their feedback. Only then would they respect the very much verbal contract. If you dislike something, you can go back and complain and they'll respect your complaint, if it's something they feel is valid. For them, it's all about the relationship and none of the paperwork. It's a totally different way of doing business, which is the fun of doing international business, travel, and living abroad. It also frees you of the problems, worries, and gripes of your own culture too. It's fucking amazing.

It took me a few reads to understand how this book's laid out but, once you figure it out, it's really powerful. Basically, it tells you how people from other cultures process information, their negotiation strategies, value system(s), who in the organization makes what decisions (locus of decision making) sources of anxiety reduction, and issues of inequality.

So, it says that "universal rules are preferred and company policies are followed regardless of who is doing the negotiation" (547). That's the bureaucratization of business that you're complaining about. Under sources of anxiety reduction, it says "There is low anxiety about life, as external structures... provide answers to important questions" (548). So, Americans like external structures, which are institutions, since it reduces their anxieties. Therefore, the complaint you're talking about, bureaucratization, is also a source of anxiety reduction in the US.

 

[CCarter]

@Philip J. Fry in certain universes elephants float. No one here has any interesting in becoming an international law expert and as usually these nonsense examples of "Turk", "Spain", in "Germany", just wastes everyone's time. In China the negotiations start AFTER the contract is signed. How do you get around that? I assume you got a round-about waste of time answer.

This is an English speaking forum and purposely kept that way - we go out of our way to discourage non-English users from screwing up the conversation/content cause of language barriers. It's safe to assume someone asking a question in English, has their contracts in English and is therefore targeting some deals/transactions in an English language land. Guess what, most English language lands have the highest rule of law with AMERICA being the #1 place with the best rule of law.

"Well in Madagascar they don't even use paper..." WHAT? So. Thanks for that, no one gives a fuck.

You always waste a lot of time @Philip J. Fry on these edge case scenarios that literally no here cares about. You're literally polluting the water with your nonsense.