Most people dream of retirement or, at the very least, a time when all their hard work will reap rewards. It's safe to say at some point independent ATM deployers (IAD) will retire, sell or leave the business for one reason or another. Operating a fleet of ATMs can be an extremely lucrative business, however decreasing interchange rates as well as increasing costs and regulatory burdens have many IAD feeling like they are working harder to earn less. Couple this with ATM saturation and rapidly changing technology and it’s no wonder some IADs are wondering if now may be the time to sell their portfolio. Challenges Facing IADs Decreasing interchange rates have had a detrimental effect on many IADs – so much so that industry surveys have reported this issue as a major concern for several years running. ATM deployers are consistently looking for ways to counteract declining rates have caused. One factor effecting the industry is increased costs – hardware, software, labor….and fraud. If regular software updates and new government mandates like ADA were not enough, now IADs must upgrade aging ATMs to be EMV compliant by October 2016 to not be liable for counterfeit fraud costs on MasterCard transactions. Those failing to upgrade by October 2017 will absorb the risk from Visa as well. The question for many IADs is whether EMV liability shifts are the worst of the required responses to increasing fraud, or just the tip of the iceberg.

The mobile payment revolution is changing the way individuals and organizations conduct business. Given bitcoin’s ability to facilitate mobile transactions, it makes sense for the two movements – bitcoin and mobile payments – to work in tandem. Hence, bitcoin and digital payments will take center stage at the ATM & Mobile Innovation Summit, Sept. 9 to 11 at the Capitol Hilton in Washington, D.C. The summit is designed for banking, ATM and payments executives and is hosted by the Electronic Funds Transfer Association, ATM Marketplace and MobilePaymentsToday. Michael J. Casey, the author of “The Age of Cryptocurrency,” will be a keynote speaker. He is a senior columnist covering global finance at The Wall Street Journal. The event rate is $269 per night. Sponsorship opportunities are available for organizations that provide services to the financial services industry. Sponsors include the ATM Industry Association (ATMIA), MasterCard, Fujitsu and FIS, the Jacksonville, Fla.-based payment technology provider. Special workshop on bitcoin/ATM/compliance The first presentation on Sept. 9 from 2 to 4:30 p.m. will explore recent developments in bitcoin, ATM and mobile compliance. There is a separate $395 fee for this workshop. Panelists for this presentation include Kathleen Scott, Andrew Beal and Jack Milford Ford. Scott, senior counsel at Norton Rose Fulbright, advises foreign and domestic banks on federal and state regulatory issues. 

This short article is addressed to today’s senior business owners who have been around the block more times than they can count. I have been around that block as well. I know what is weighing on your mind. I know many of the thoughts going through your head, which you have discussed at meetings with your staff or your partners (if you have any). What is the next step, the next ‘Path’ to take regarding your business? You are not alone. You are not the first nor the last to analyze, think about, worry about, contemplate, ponder and just freeze, not sure what to do next. Most of you chose an initial ‘Path’ to start a business years ago, possibly out of your garage, your car, and possibly through an LLC or a corporation or not. Your focus was not to spend money on legal to create a business. No, your focus, your time, all your energy and money was devoted to get the business, whatever it may be, up and running. First priority was to start generating revenue, however you could, to cover expenses. Hopefully, as soon as possible thereafter, your second priority was to make more than enough money at the end of the day, the week, the month to cover more than just expenses. After that, you were off to the races. One does nothing, just continues to run the business as is, standing still, resulting in the business slowing down, contracting, and eventually sliding backwards, potentially losing revenue and valuation, until the business closes or it goes bankrupt. Path C. One sells: the entity (the company, business, and all of its assets are acquired by a buyer) “Entity Sale” or only the business’ assets (the legal entity structure, minus assets, are not acquired by a buyer) “Asset Sale”. A good deal of my legal career has been spent counseling business Clients with regard to taking the Third Path C. The Third Path C., either Entity Sell or Asset Sell, involves many steps that are typical for either type of transaction. However, there are significantly more issues to be considered in an Entity Sell versus an Asset Sale. I believe on a continuing, ongoing basis, there will always be companies marketing to buy, looking for, asking prospective business owners are you ready to retire, ready to exit, ready to sell. These buying companies are “Acquirers”. This is one way how Acquirers grow their respective company/business. Typically at most business conferences I have attended over the past several years, similar to the last ATM conference held this past September, such Acquirers were looking to engage parties, like you, inquiring ‘are you ready to retire, ready to exit, ready to sell’. If you are a business owner who has been around the blockI know. I have represented many, many business Clients in the course of my career, who when they first called me after their businesses took off, they handed me their business records (which might be a stretch to call them that) in the proverbial shoe box. After they (you) started growing their businesses, their focus, their priorities evolved, just as yours have. Typically at this juncture, the building of a larger company business base takes place. Contracts, deals, transactions, regulations, risk mitigation, litigation, etc., arise and become more complex. If you had not already hired an attorney at this point in time, many of you decided to do so. Again, I know, as typically this is when the second wave of new business Clients retain my legal services. However, many did not. Regardless of whatever you did, you not only survived, but your company thrived. And now here you are, years later, after your initial Path. You have built a mature company and business, which has been good for you. But what are you going to do next? What is the next step, the next ‘Path’ you are considering to take regarding your company, your business, yourself? It varies from business owner to owner, but as I stated at the beginning, this article is addressed to senior business owners. To simplify things, based on my experience in counseling successful, mature business Clients, I advise my Clients there are three Paths one typically travels. First Path - One begins/starts a business. You have done that! Second Path - One builds/grows the business into a successful company that is generating a net profit and has a good/great valuation. You have done that! Third Path - One transfers/divests, lose ownership or sells the business. This Path evolves into a “Tripartite” Path. Path A. One transfers ownership of the business to family member(s) and steps aside, retires. Path B. One does nothing, just continues to run the business as is, standing still, resulting in the business slowing down, contracting, and eventually sliding backwards, potentially losing revenue and valuation, until the business closes or it goes bankrupt. Path C. One sells: the entity (the company, business, and all of its assets are acquired by a buyer) “Entity Sale” or only the business’ assets (the legal entity structure, minus assets, are not acquired by a buyer) “Asset Sale”. A good deal of my legal career has been spent counseling business Clients with regard to taking the Third Path C. The Third Path C., either Entity Sell or Asset Sell, involves many steps that are typical for either type of transaction. However, there are significantly more issues to be considered in an Entity Sell versus an Asset Sale. I believe on a continuing, ongoing basis, there will always be companies marketing to buy, looking for, asking prospective business owners are you ready to retire, ready to exit, ready to sell. These buying companies are “Acquirers”. This is one way how Acquirers grow their respective company/business. Typically at most business conferences I have attended over the past several years, similar to the last ATM conference held this past September, such Acquirers were looking to engage parties, like you, inquiring ‘are you ready to retire, ready to exit, ready to sell’. If you are a business owner who has been around the block, and over the many years has successfully built a company that is generating a good/great net profit and has a good/great valuation, then I caution you to be as wise, as deliberate, and as smart as you were while walking around the block over all those years building/growing your business, when choosing a Third Path, especially Third Path C. The next Path you take, in particular Third Path C., is more important than the initial Path years ago you first took when you started your business. Consequently, I highly recommend you have your own team to counsel you, and you rely upon them to represent you, whomever they maybe, in order for you to make wise decisions. You should not just rely upon the acquiring party to guide you down whatever Path you choose to take.  In conclusion, if you are at the Third Path, which branches off into three different directions as I’ve described above, take your time, analyze where you want to go, and before making a decision and commitment to Path A. B. or C., seek sage advice and counsel to assist you traversing the Path you choose. Good Luck!

Are you considering buying a business or a business’ assets to grow/build your existing company? Or are you considering selling your business or selling some or all of your business’ assets? Usually, there is an acquisition process that typically is followed for whichever type of party, acquirer or seller, you will be, and for whatever type of transaction you are contemplating. This short article will provide a broad overview and brief discussion of the various steps of the Process one initiates and follows to consummate an acquisition transaction. Having knowledge and an understanding of the Process should save you time and money, regardless of whether you are an acquirer or seller, and regardless of the type of transaction being pursued. Whether a party is acquiring, a “Buyer”, or selling, a “Seller”, typically there is a basic 12 Step Process. And, typically, the following legal documents, in order, are prepared & signed for an acquisition transaction: (i) binding bi-lateral non-disclosure agreement (“NDA”), (ii) non-binding letter of intent (“LOI”) or non-binding memorandum of understanding (“MOU”), (iii) a definitive, binding purchase agreement (“PA”), and if an asset acquisition, typically referred to as a binding asset purchase agreement (“APA”), with various and numerous exhibits to it (which will include extensive terms, warrants and representations, non-compete, non-solicitation, employment agreement, possible holdback), and (iv) an assignment/bill of sale (“BOS”). The exact type and number of documents for a transaction varies from transaction to transaction, depending on the negotiations between the parties, type of transaction, and agreed upon transaction terms. Type of Transaction Usually, a transaction falls into one of two categories. Either, it is an “Entity Acquisition”, which typically is the minority of consummated transactions; or, it is an “Asset Acquisition”, which typically is the majority of consummated transactions. If a party is a Seller for either type of transaction, be prepared to be thoroughly scrubbed by a Buyer with respect to most all aspects of the Seller’s business being extensively analyzed by the prospective Buyer, even more so if it is an Entity Acquisition vs. an Asset Acquisition. A Buyer needs to be prepared to extensively scrub the Seller’s business. A Seller should be prepared to produce for the Buyer: (i) audited and/or unaudited financials, and tax filings typically for past three years, (ii) records, (iii) documents, (iv) data, all with regard to Seller’s business operations, including all relevant and applicable contracts Seller has entered into for the business. Discussed further in Due Diligence below. Preparing To Dance If a party is considering a transaction (which I refer to as ‘getting dressed for the ‘Dance’), which Dance is it going to be? Two key questions first need to be answered that determines the transaction and process. First Question: Is the party going to be a Seller or Buyer? For purposes of this article, I will assume the party is a Seller. Second Question: Is the Seller desiring to do an Asset Acquisition or an Entity Acquisition? This question is usually answered by the prospective Buyer the Seller is engaged with, based on what type of transaction the Buyer is desiring to accomplish. Of course if a Seller has a specific type of transaction the Seller wants to consummate, then the Seller will answer the Second Question, but in doing so, will probably narrow the pool of prospective Buyers. Asset Acquisition For an Asset Acquisition (also referred to as a ‘Portfolio Sale‘), typically, a Buyer is only buying all or selected assets of a Seller’s busienss. The Buyer is not bying the legal entity (assuming the business is a corporation or limited liability company). All assets of the business would typically include almost everything involved in the operation of the business, as well as anything adding value to the business. As an example, this would include equipment, any and all types of contracts, IT, various types of busines lists, etc. What it does not include is the legal entity‘s state registration of the business and any federal registrations, however, the name of the business maybe be considered an asset. Typically the Buyer through due dilligence will detemine what assets the Buyer wants to acquire, with approprioate legal documents produced to transfer all such assets to the Buyer at “Closing” of the transaction. Entity Acquisition For an Entity Acquisition, the Buyer is buying the legal entity, which includes everything involved in the operation of the busienss, excluding employees (employess/officers who have written contracts with the Seller, subject to the terms of the applicable contracts, would be considered assets of the business). Basically, the Buyer takes over the business of the Seller ‘lock, stock & barrel‘, including all liabilites and all ‘skeletons in the closet‘ of the legal entity. Due to liabiltiy risks involved in Entity Acquisitions, and the Buyer wanting to mitigate such risks, typically there will be significantly more legal documents prepared to be signed by the Seller to close a transaction than for an Asset Acquisition. Typically, Entity Acquisitions have a much longer Process, thus takes more time, with additional agreements to be prepared and signed by the Seller to consumate the transaction. Due Dilligence A potential Buyer of an Asset Acquisition through due diligence will analyze all aspects of a Seller’s past and current business operation, all assets and liabilities associated with the business operation, revenue generated by the assets, as well as determining valuation of the assets individually and in the aggregate. A potential Buyer typically will conduct significantly more detailed due diligence for an Entity Acquisition than one conducted for an Asset Acquisition, due to higher level of potential liability exposure being acquired/assumed by the Buyer. The depth and length of due diligence by a Buyer typically will be determined by: (i) type of acquisition due to significant differences between an Entity Acquisition vs. an Asset acquisition, (ii) how well organized the Seller is and (iii) how up to date and organized are the Seller’s, including but not limited to: contract files; tax and financial reports; corporate records; all state/federal filings; IT, patents, IP, and tradename files; HR records and employment contracts; current and complete list and files of all debt obligations and liabilities; lawsuit files (filed & pending); with all such applicable documents, records and filings signed, updated, complete, readily available to be reviewed & copied when produced. Additional reports, additional documents and records to be produced typically occur in an Entity Acquisition due dilligence vs. an Asset Acquisition.  Typically, for most acquisition transactions, the more knowledgeable a prospective Seller has about all aspects of the Seller’s business and assets when starting the Dance with a knowledgeable, prospective Buyer, usually this results in a higher valuation being negotiated and agree to by the parties, whether it be an Entity Acquisition or an Asset Acquisition. This in turn typically results in an easier Process to negotiate, prepare, finalize and consummate/close an acquisition transaction. At the same time, as stated above, knowledge and an understanding of an acquisition Process, not only saves you time and money, but can significantly assist you to navigate whatever acquisition path you have taken, particularly at the ‘negotiation’ table. Be smart!

Most of the blogs I have written the past couple of years have addressed (i) establishing business entities, (ii) analyzing agreements, (iii) discussing contract terms, (iv) the value of establishing a contract database of your business’ agreements for data mining, (v) focusing on EMV shifting liability, (vi) risk mitigation, (vii) identifying business’ assets, (viii) recommending what a business should be doing to enhance its valuation for selling the business or its assets, (ix) recommending a process to follow when considering an acquisition of a business or its assets, (x) etc. The reason being is that almost all of my Clients are businesses covering a wide spectrum of sizes, organizations, products and services, with the primary emphasis for my practice in the ATM and electronic payments industry. As reach the end of another year (2018, which spans over four decades of practicing business law), I am conflicted. I am both saddened, but at the same time encouraged, by the manner in which businesses are conducting themselves in the market place, and not just the ATM and electronic payments Industry. I am old school and I readily admit to that. And although I refer to myself as a cowboy from Nevada (born in Nevada and after graduating from high school, I migrated to California for college and law school and then settled in Oregon, but all the while staying in the West), I would be laughed at by the guys I went to high school in Nevada, many of whom were cowboys. I mention this because 14 years ago, I bought a book entitled “Cowboy Ethics – What Wall Street Can Learn from the Code of the West.” In that book, the author re-stated the unwritten Code of West that he referred to as the “Ten Principles to Live By.” I bring this up, as prior to ever reading this book, from a young kid on, I was taught, mentored and learned to incorporate the Cowboy’s unwritten Code in how I lived my life. I applied this Code from the get-go after I graduated from law school in how I have conducted my business and law practice. Based on all my years of experience, I truly believe that the four cornerstones of most successful businesses are (1) Honesty, (2) Integrity, (3) Your Word was your Bond, and (4) Accountability, based on my application of the Code. For most of my career, including with the ATM and electronic payments Industry, the vast majority of my Clients and business relationships have been with people/organizations that exemplify these four virtues. However, in the past several years, as I have helped negotiate contracts, execute deals, consummate & implement transactions for my Clients, I have been dismayed, that not only one side, but sometimes both sides, including some of my Clients, modus operandi is just the opposite of these cornerstones. Unfortunately, and not surprisingly, there have been and will continue to be a higher probability that many of these contracts, deals, and transactions end up being breached/terminated. Typically, the parties end up in court, incurring major costs and expenses, destroying business relationships/partnerships, all the while blaming everyone and everything. Rarely do they ever consider that they may be as much as fault as the other side for causing these transaction failures due to how they conduct themselves. Over this same time frame, more so than in prior years, I have had to reluctantly terminate some clients, as I decided I could not continue to represent them in the manner they continued to choose to run their business. Not that I am a saint, but if you are going to talk-the-Code, you need to follow-the-Code, and Code #10 is “Know Where To Draw The Line,” so I drew a line. Fortunately, and the reason for this blog is to say that in the latter part of 2018, I have been encouraged, from small start-ups to larger, established companies, that I have had the opportunity to represent, I have encountered new “people” (businesses), as well as ones I have met on the other side of the table, who are either building or operating their respective businesses with honesty and integrity, they do what they say they are going to, and are accountable for what they do, even when they have made a mistake and are wrong. As I stated above, almost all of my Clients are businesses providing a product or services, primarily in the ATM and electronic payments Industry. I am proud to have been associated with this Industry since 1998 and look forward to many more years of association. However, we are all now in an age and an era of more and more federal and state regulations to protect consumers from unsavory businesses, increasing litigation, as well as the general public’s perceived negativism/pessimism of businesses generally being greedy/dishonest. So, going into 2019, I recommend that we all need to look at our “hold” card and ask ourselves: What do I stand for? What does my business stand for? How do I, how does my business operate? Do I want to be respected? Do I want my business to be viewed favorably? Do I want my business to be successful, but doing so by contributing and building morally and ethically?  And, if you are interested in the Cowboy unwritten Code or Ten Principles To Live By, they are as follows: Live Each Day With Courage. Take Pride In Your Work. Always Finish What You Start. Do What Has To Be Done. Be Tough, But Fair. When You Make A Promise, Keep It. Ride For The Brand. Talk Less And Say More. Remember That Some Things Aren’t For Sale. Know Where To Draw The Line.

The board of directors of ATMIA (the ATM Industry Association) met in conjunction with the group’s annual conference last week in Las Vegas and elected a new executive committee. The five-person committee will serve a three-year term, according to an official announcement. ATMIA is a non-profit trade association representing more than 10,700 members from over 650 companies in 67 countries. The membership includes financial institutions, independent ATM deployers, equipment manufacturers, processors “and a plethora of ATM service and value-added solution providers,” as described in an official press statement. Here are the members of the new ATMIA executive committee: President—John J. Leehy III, Payment Alliance International Inc., a privately-held ATM provider, based in Louisville, Ken. Deputy President—Jeff Matthews, Grant Victor Companies, an ATM service and solutions provider based in Kaysville, Utah Chairman—Peter Kulik, Citibank Finance Officer—Sandra Hartfield-Papie, Monex Financial Services, a global supplier of dynamic currency conversion and other services, headquartered in Ireland CEO—Michael Lee, ATMIA. Lee is based in South Africa New committee heads Three ATMIA U.S. committee groups also announced the election of new co-chairs last week. Serving terms of two years, those new co-chairs are: U.S. Regional Board—Elizabeth Bohlen, Evolve Bank & Trust, West Memphis, Ark.; Donna Embry, Payment Alliance International U.S. Government Relations Committee—Jack Ford, Jack Milford Ford Law; Brad Moody, Lowers Risk Group Independent ATM Deployers Committee—Jeff Hayes, Edge One; Jason Zubik, Elan Financial Services Founded in 1997, ATMIA has active chapters in the United States, Canada, Europe, Latin America, Asia-Pacific, Asia, Africa, India, and the Middle East.