KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** What to watch for in the broker agreement when selling or buying Part 10 May 21, 2025 ********************* What to watch for in the broker agreement when selling or buying Part 10 ********************* This is Part 10 of the series of articles dealing with the buy sell agreement. While not part of the buy sell agreement, other than to be identified in the buy sell agreement, the agreement with the broker is separate from the buy sell agreement. Brokers generally represent the seller, but brokers can also be buyer's brokers, representing the buyer. When considering a broker there are issues to consider, and the percentage fee the broker is asking for should be only one of your concerns, and as you will see, probably not the most important issue. Broker fees for alarm transactions can range from around 3% [that's the fee charged by K&K] to around 10% of the sale price. With large transactions that could make a significant difference. There are other issues that usually turn out to be more important, sometimes irritating. These include intrusiveness by the broker, exclusivity, term, expenses, entitlement to commission after broker contract is terminated. Let's look at these issues: Intrusiveness: This is a broker who thinks he needs to know every detail about your business, more than any reasonable buyer would want to know. The broker not only wants the information but becomes annoying with the urgency of your compliance with the demands. In short, the tail is wagging the dog. Some brokers do get more involved than others, but I think a seller should be able to navigate the due diligence process without the over-involvement of the broker. Keep in mind that the broker, who is agent of the seller and who owes a fiduciary duty to the seller, has a keen interest in making a deal. There is an inherent conflict between earning the commission and best interests of the seller. it takes a seasoned [and less hungry] broker to understand the role of a fiduciary. [K&K limits its broker role to offering advertising the sale and introduction. Because K&K is also counsel to seller it adheres to fiduciary standards] Exclusivity: The broker may, and usually does, insist on exclusivity. [K&K does not]. Keep in mind that exclusivity can mean more than one thing. It can mean the seller cannot deal with more than one broker, or it can mean that the seller doesn't have the right to sell its business except through the broker. A broker agreement that really over-reaches would give the broker the "exclusive right to sell" which means the seller has abrogated the right to sell to the broker [I actually haven't seen this one yet]. Term: Can you cancel the broker agreement whenever you want or are you locked in for a term of years, sometimes many years. The problem with that is that the sell process shouldn't take years. It shouldn't take years especially since the broker may have come to you or represented to you that he "has a buyer", only to find out he doesn't, and instead of selling your company in weeks the months or years drag on. While sometimes it does take a long time, maybe years, to sell accounts, seller usually know or anticipate that or aren't in any hurry so the price is knowingly inflated. Here the seller that was induced to select the broker claiming he had a buyer will be particularly disappointed and disillusioned, when finding out there is no such buyer and now the broker is exclusive for three or more years. Expenses: Some brokers require the seller [or a buyer's broker] to pay a fee up front or cover certain expenses, rather than just charge the agreed upon percentage commission when there is a sale. most brokers do not charge for up front expenses. Right to commission after broker agreement terminated: Most broker agreements will make it clear that a commission is due the broker even if the agreement is terminated if it was the broker who made the introduction. Sometimes there is a limit in time, sometimes not. It's a good idea to have experienced counsel review your broker agreement before you sign it. Changes usually have to be made. [the K&K agreement is exception because there are no advance fees, there is no exclusivity and the agreement is cancelable any time you want]. It's not an expensive review or negotiation and you don't want to put yourself into an uncomfortable relationship where it costs more to get out of then get into. *********************** STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** WEBINARS: https://www.kirschenbaumesq.com/page/alarm-webinars *********************** ALARM ARTICLES: You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles updated daily ******************** Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth *********************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* PODCASTS: https://podcasts.apple.com/us/podcast/ken-kirschenbaum-presents/id1794851477 ************************* Getting on our email list / Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
