Question:
     Ken,

What advice can you give me if considering selling some or all of the company's accounts?  Are there any legal ramifications (such as: system failure or whatever after the transaction) to the selling company from it's customers once the buying party has purchase the accounts?  What are the pitfalls that a selling company should be mindful of?

Thanks,

Dave
+++++++++++++++
Answer:
    Dear Dave:
        The best advice I can give you regarding the sale of your subscriber accounts or your business is to be properly represented by counsel knowledgeable in the alarm industry, and engage counsel before you have your first discussions with a buyer so that you know the issues that you, as a seller, need to be aware of.  You have spent a great deal of time establishing and developing your business and you will want to maximize your sale price and have terms that make it more likely that you will
receive all of what you bargain for.
        Though as a seller you may think that the only issue you need to be concerned with is getting your money, rest assured that the buyer will introduce a myriad of issues, because the buyer is going to be concerned with much more than just paying you.
        I am sure you won't be surprised when I tell you that one of the first questions you will be asked by the buyer is "do you have contracts", and the buyer is going to want to see your form contracts, know the age of those contracts, and depending on the buyer's sophistication, whether you have complied with laws governing the sale of the systems, and laws pertaining to renewal terms and required notification.  The buyer will want to know your mix of subscribers, residential and commercial, your accounts receivable experience, type of equipment typically used, service records, who does your monitoring, whether you have your own lines, whether you are locked into a monitoring center, your claims experience, location of accounts and other issues important to a particular buyer.  It may be important to a buyer to know if you intend to stay out of the alarm business, whether you have key employees who may compete with the buyer should be purchase the accounts and whether your subscribers have a peculiar loyalty to you personally that may cause them to want to shop the service once you are out of the picture.
    You will need to consider the guarantee period and the payout period, the hold back and the hold back terms.  Not all guarantees are the same; in fact most are tailored to meet the specific concerns of the parties
    Though agreements for the sale of the accounts or your business generally come in one of two forms, either asset purchase or a stock sale, the terms of each agreement are always specific to the parties.
    I have on occasion offered to sell a "form" agreement for an asset sale [which is the form most often used] but it should be used by you only as a guide to see the types of issues that will likely come up in your deal; it's not a substitute for proper legal representation.  It could of course save a lot of time if your attorney is not familiar with alarm deals.  A form agreement is not on my website as an offered contract so you would have to send a request for it.  The price would be $500.