Common Mistakes When Divorcing Spouses, Family and Business Partners

I have had considerable experience working with agency owners who were divorcing someone: a spouse, family member, business partner or sometimes a combination of all at the same time. These are always tough times for everyone. When emotions are running wild, stress is overwhelming, and logic goes out the door, the opportunity to make a bad situation worse is great. Below is some hard-won advice about resolving these situations in the least traumatic way possible.

Good Counsel

Seek extraordinarily good counsel and buy the best you can afford. By “counsel,” I do not mean just legal counsel. If all you have is legal counsel, be prepared to suffer even more because no matter how good an attorney is, an attorney cannot provide for the whole solution.

Get counseling regardless of which side you are on, because everyone loses something in these deals. Counseling can help restore rational thought, too. Bringing rational thought to the table is important because the parties are in such raw emotional states that their decision-making becomes grossly flawed. Additionally, many people pursue scorched earth strategies because — and this is key — in these situations, making sure you get more than the other person often becomes paramount. I have literally seen partners state publicly they did not mind losing every penny if their partners lost every penny, plus one.

Good Lawyers

Get great legal counsel. I have seen too many incompetent lawyers give lousy advice. Even in normal times, it is difficult to recognize bad legal advice. And even if recognized, it is difficult to go against your attorney’s advice. When in a completely emotional state, going against bad legal advice is next to impossible. Here are some tips.

When hiring an attorney, hire one that specializes in your area of need. If divorcing a spouse, get a great divorce attorney. If divorcing a partner, get a great business attorney. The laws and even the type and quality of judges are quite different in these different courts. Having the knowledge, experience and personality that fit that court often makes the winning difference.

If litigating, get a litigator. Few attorneys are competent litigators. I have been frustrated to see (or happy depending on which side I was on) an attorney’s spine turn to a wet noodle when the attorney had to actually negotiate or worse, litigate. For many attorneys, their skill set is only for sitting behind a desk.

Few attorneys can practice multiple areas of law competently, much less perform well. Do not make the mistake of asking your attorney to go outside his or her area of expertise, and don’t believe the attorney who preaches about being a good attorney in all situations.

The best attorneys recognize the client’s cost. Cost does not just mean their legal bills. They understand that while the case may be won, the war is lost and they’ll advise their clients appropriately. The cost is so much more than money. Just the cost of not putting this difficult time behind you as quickly as possible and getting on with life can exceed the value of a win.

People in these situations often have the feeling that everything is just not fair, so they keep fighting. People get this feeling because they’re losing even when they’re winning. A good attorney will help you see this price you’re paying. A good counselor will help you see this, too.

However, accepting this high price and moving on may give an advantage to an unreasonable aggressor. The best attorneys create a strategy to nip the aggressor’s efforts early and eliminate this advantage. Not many attorneys have this much talent, so it pays to find them.

Valuation Counsel

Involve a great business valuation consultant early if the situation involves splitting of assets. Hire one that:

• Specializes in independent insurance agencies.
• Knows and can articulate the different valuation standards that apply in different situations. Too many business valuation “experts” give the same valuation regardless of the situation. Courts often require different valuation methods be used for specific situations. The result is that a valuation for a marital divorce may result in a value of 1.5 times, and the valuation for a partnership breakup may result in a value of 1.1 times, or vice versa. An analogy is the difference between replacement cost and market value. It is the same building with two very different but both totally legitimate values.
• Will give an honest opinion regardless of whether the client will like it or not. Too many people are led astray by valuation consultants that give clients the answers they (or their attorneys) want to hear, rather than the answers they need to hear.

Give In

Some people say they will do everything in their power to keep the other side from getting anything. Without realizing it, they are telling the world they won’t be rational. Often the result is they lose even more.

I am not suggesting the cost is so high the divorce should be avoided or that you give the other side everything. But, giving in a little often pays huge returns. A small act of kindness may diffuse raw emotions. A small act of rationality may help the person see past the divorce to the next life.

Topics Mergers & Acquisitions