Agreements you'll see when selling or buying alarm accounts – the LOI / Comment on buying parts on Internet July 16, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Agreements you'll see when selling or buying alarm accounts – the LOI / Comment on buying parts on Internet
July 16, 2018
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Agreements you'll see when selling or buying alarm accounts – the LOI 
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            This is the fifth article in the series Agreements you’ll see when selling or buying alarm accounts.  The document we focus on in this article is not technically an “agreement”, and in fact when properly drafted it specifically states that it’s not an agreement; it’s subject to a more formal agreement in the future.  This article discusses the Letter of Intent, the LOI, and a similar document called Letter of Interest.
            The LOI is intended to lay out the terms of the deal in some detail, though not all essential terms are addressed.  The LOI is generated, which means drafted and presented by, the buyer. Typically it will express the multiple being offered, state the expectation of number of accounts and RMR and mention the term Qualified Contracts or accounts, perhaps offering some description of what buyer considers a qualified account.
            Because the LOI is not intended as a formal agreement, or any agreement for that matter, I don’t favor them and I rarely suggest that one be used when I represent the buyer.
            Even less useful is the Letter of Interest.  This document, also referred to as an LOI, merely expresses an interest in making a purchase.  It will typically contain even less terms than the Letter of Intent.
            The LOI can be important in the overall deal because it will lay out the terms that the buyer expects to see in the final agreement.  Therefore, if you see a multiple of 40 with a guarantee of 1 year, and a qualified account defined as one that has a properly written contract with an original term of at least 2 years and not more than 90 days in arrears, don’t expect to get to the final contract stage and start re-negotiating with the buyer.  That buyer is not going to make significant concessions and change the terms in the LOI. 
            Some sellers don’t engage counsel until they have already accepted an LOI. So when they come to me and I ask them, “hey, am I reading this right?  You agreed to 28 times and a 24 month guarantee?” it’s almost sad to watch the expression when they find out that those terms are not customary, not typical and a really bad deal.  It usually ends right there with no deal.  The buyer thought they had a real putz to deal with and when the seller woke up and learned what’s what the seller was no longer interested because the purchase was no longer a steal.  You can avoid that scenario, waste of time and money, by getting proper advice at the get-go, so that when the LOI comes in the buyer knows what you expect and what is going to fly in the agreement.
            So the LOI should be the fifth document you see, not the first.
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Comment on buying parts on Internet
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Ken
            I’d like to respond to all those consumed with the idea that alarm parts can be bought on EBay and Amazon as opposed though alarm distribution.
            Based upon those complaining about alarm parts that can be bought on EBay and Amazon cheaper as opposed to their local alarm supply distributor, do so and stop complaining since nothing will change. What was not discussed in each case was the percentage or amount saved.   Is it two percent, five percent, ten percent or what?   Three dollars, five dollars or ten?   What is the price of the items to begin with?   How does it affect your bottom line over all by not doing so?   This is not something new. How about blanket purchases that was done in the past and most likely now as well at much lower prices to an alarm firm.   In order to take advantage of it they sold product to their local alarm distributor to meet their numbers and indirectly supply the local crowd at a lower prices?   That what is being done here as well but on the internet. 
            All those complaining, do you realize that many of the major wholesale monitoring firms provide monitoring directly to major retail stores across the country thereby doing the same?   It is at a discounted rate possibly at what they are charging you.   Are you going to stop doing business with them and move your accounts if you are into one of them that does?   
            Everything has become a number games and the service and product is only the way to achieve it.   Is the DYI product equal to your job and service provided?   I should hope not, but they will exist and prosper for those who want to use it and you can do nothing about it as well.   By the way, who is the whole monitoring firm that does their monitoring since they do not?
            Find something better to complain about or just do not.
Name withheld and in witness protection plan
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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
516 747 6700
www.KirschenbaumEsq.com