In general, there’s usually an accumulation of bad blood or discontent that has accumulated over a period of time, and in most cases, it’s only the fact that they are making money that kind of glosses over the problem. It’s usually when there’s a dip in the economy, or a business is suffering some financial troubles, where at that point one party will say to the other “I’ve had it, and I want out.” It’s rare where it’s somebody who just says they want out, and in that case, usually they’re on speaking terms and are able to say “I want to sell. Do you want to buy me, or do you want me to find a buyer to come in and buy my interest?”
Typically, the corporate divorce situation is where there have been longstanding issues that have not been dealt with, and they kind of come to a head. It’s not very pleasant. It usually results in either somebody being fired, or somebody being isolated or their life is made miserable within the business, and people say “I’m not agreeable to that,” and they go from there.
When it comes to a situation like corporate divorce, I think it’s imperative that the client have a lawyer that is well-versed not only in business law, whether it be corporate law, partnership law, limited liability law, but also have experience with employment law, and have experience with accounting, since, in many instances, there are things done in the business that are not necessarily in accordance with generally accepted accounting principles. It takes someone who can read the financial statements, who can speak to a business valuation expert, and who understands what makes a business more valuable, and what can be done to make it less valuable.
I had a situation where the business evaluation expert came in and said that the business was worth $1m, but it had $750k of cash on its balance sheet. Now, if you didn’t know how to read a balance sheet, and appreciate that it had $750k in cash, you wouldn’t be able to argue with the evaluation expert to say “I think your methodology is flawed.” I’d buy a going concern any day of the week if I’m paying $1 and getting a business with $0.75 in it already.