MERGER SHE WROTE
Merger She Wrote is a podcast for business owners looking to scale, sell, or transition their companies. Each episode unpacks the strategies behind successful exits, the pitfalls to avoid, and the steps to maximize value. Featuring expert insights and real-world case studies, this podcast helps you navigate the complexities of M&A with confidence. Whether you're planning your next move or just starting to think about the future, Merger She Wrote gives you the knowledge you need to make informed decisions and build a business buyers want.
MERGER SHE WROTE
EP 15 | De-Risking Business Sales: The Critical Role of Escrow in Every Transaction
Most deals don’t fail from one big mistake; they unravel through tiny cracks in trust and timing.
Monica May-Dunn, CEO of Arizona Escrow and Financial Corporation, joins Paloma Goggins to reveal what really happens between LOI and closing. From escrow strategy to funds flow and clean documentation, she shares the practical moves that keep deals alive and relationships strong.
With real stories (including a missing prize bull) and battle-tested insights, this episode shows how precision, persistence, and trust turn complex closings into smooth wins.
Press play for a behind-the-scenes look at how great deals actually get done.
In the world of business, not all deals are what they say. Fortunes rise, empires crumble, all stroke. Mergers, acquisitions, and hostile takeovers. Welcome to Mergers She Wrote, where we examine strategies and stories behind the biggest deals in business. Because in MA, the real risks are the ones you don't take. Welcome to Mergers She Wrote. I'm Paloma Goggins, the owner of Nocturnal Legal, and your host. I'd like to welcome my guest today, Monica May Dunn. We are going to talk about demystifying the transaction process for mergers and acquisitions and explain that there's a few different ways for you to sell a business. Monica, thanks so much for being on today. Thank you for having me. So Monica is owner and CEO of Arizona Title and Escrow Corporation, which, for anyone joining our conversation today that is new to the merger and acquisition space, Arizona Escrow can play a pivotal role in the way that you close your business. And I think I have a list of questions for Monica today. I think based on our pre-discussion for this episode, I'd like to start maybe with just a couple of basics for anybody who's listening and doesn't know kind of where escrow begins and ends. So when we're just about to go through the initial offer, which is in a transaction, you have a letter of intent. If you're a buyer, you're writing that letter of intent to a potential seller. That sort of solidifies the very first piece of paper that says, I'm serious, we're gonna buy your business. Now, in the letter of intent, we can have a thing called an earnest deposit. And like selling a home, it's like putting down a deposit on a new home. Tell us how Arizona escrow kind of plays a role with the earnest deposit.
SPEAKER_00:Okay. So with the once we have the letter of intent and the earnest money is, you know, given, we get the the sooner we are involved, the better. For you know, every question that comes up. The sooner we're involved, the better. And so we will open that escrow, assign it an escrow number, and then we will send out wiring instructions. Um, that is the preferred way to get the earnest money. And then we we kind of wait as the uh brokers or the attorneys let us know what the next steps are. So we can either do the UCC search. We're there really to be the gatherer of all the information, all the contacts, that's what's most important. Um, buyers and sellers' names, entity documents, all those things. So as soon as we can get that open, the better.
SPEAKER_01:So when someone deposits the earnest deposit with Arizona Escrow, the role then is just to hold on to it until closing. What happens if the closing doesn't occur and the LOI just becomes dead in the water?
SPEAKER_00:So depending on what it's written in the LOI, normally that money goes back to the buyer unless there's something in the LOI saying that the money is non-refundable after a certain date. So we really we look at the contract and we make sure we follow all the instructions in there.
SPEAKER_01:Have you guys been in a situation where it got heated and you have to wait essentially until the parties reach an agreement? Or potentially, I I know there are some times that it goes to litigation. I haven't been part of that, but have you guys been in sticky situations before where the earnest money is in dispute?
SPEAKER_00:Yes, nobody can agree. The contract was too vague. And so either we do a 13-day demand letter, and um, if that doesn't work, then it ends up going to interpleter. And when it goes to interpleter, usually that the attorney fees get taken out of that those funds. So yeah.
SPEAKER_01:Well, and I would say most earnest deposits aren't substantial amounts of money, they're more of like a in-kind deposit to make sure that you're serious, right? Correct. So this whole idea that if you can't reach an agreement, you could have fees taken out of it. I mean, at that point you might as well just agree on what the sum. Obviously, if if the amount is like$50,000, it might be a different story. Correct.
SPEAKER_00:But sometimes most of the times five,$10,$15,000,$25,000. Yeah. Yeah. So it's it's one of those things that I want to make sure that, you know, in the contract, we have to make sure that there's really good instruction on what's to happen uh with that, with that money if if the sale doesn't happen.
SPEAKER_01:Absolutely. And I was gonna say too, the I get asked all the time by my clients, you know, can you just hold the earnest money? And I always recommend using escrow because I'm not really a third-party neutral like you guys are. Um, you know, I represent one party over the other. And granted, there are times when people are okay with having counsel of one party hold on to the funds, and there there are fiduciary responsibilities there, but I just think it becomes a little bit lopsided in terms of power. Um, and if there is a dispute, could it be marred by the fact that the party holding the funds technically represents and has a fiduciary responsibility to their client specifically?
SPEAKER_00:So exactly. Because we help we assist other attorneys who have um who may want to do the escrow themselves and we are able to hold just the earnest money. And uh then that's a different situation between two attorneys. They bring us because we are that neutral third party.
SPEAKER_01:Well, I'm gonna dive in. I think that was a great introduction. I just I want everybody listening who isn't a hundred percent aware because I feel like there are times when clients come to me and we get into the discussion of earnest deposit. And especially if it's a seller who's worried about sharing confidential information or intellectual property, you know, we get into these discussions about earnest deposits and how they can kind of act as a gateway or a threshold for maybe disclosing more important information as the deal progresses and getting to keep some of that money. And um it's it's just what's crazy to me is that earnest deposits aren't used all the time. And to me, it's you would never buy a house without an earnest deposit. Why would you buy a business without putting an earnest deposit down, especially considering how much time and money is going to be spent in drafting the rest of the documents and negotiating them?
SPEAKER_00:Absolutely. And yeah, I highly recommend earnest money because then the seller is actually opening their books up to the new buyer, and yeah, during that due diligence period, there's a like a lot of private intellectual property things that they may not want the buyer to know just yet. But with that earnest money, it kind of they're committed, they're really serious about buying it. Absolutely.
SPEAKER_01:So besides facilitating essentially the intake, holding, and payout of earnest money, which if the deal closes, gets credited towards the purchase price, it kind of gets bundled in. What other roles does Arizona escrow really facilitate or handle when it comes to transactions?
SPEAKER_00:So after that, that period, we can do a UCC search, which actually will look for any liens or judgments that the seller may have that the buyer you know may want to address, or they have things, the liens that need to be cleared up. So we will do a UCC search. We'll ask both parties if they want that, and then we start gathering all the information, entity documents from the operating agreement or the membership interest documents, uh, because we need to find out who is who's really legally able to sell or buy the business both sides. If your entity documents have to be your operating agreement, you have to be able to either prove that you can buy a business with that entity or sell a business with that entity. And then we start gathering, um communicating with the lender, if there's a lender, um, and then the documents that we prepare for the for the closing is the entity documents. And also there's um some addendums. If things happen during the L or the purchase agreement and the closing, there's things in an addendum that we can add that things that change as the process goes on. And uh yeah, I I would say that mostly it's the payoffs and how we're gonna be processing that that closing.
SPEAKER_01:For anyone who's unfamiliar with what payoffs are, um essentially if a business that's being sold has outstanding debt on the books, Arizona escrow can essentially take in the purchase price from the buyer and utilize a portion of those funds to pay off the debt so that effectively the qualifier in the purchase agreement, whether it's like free of debt and liens and all these other things, is satisfied at closing.
SPEAKER_00:So, yes, at closing, we'll take the the sales, the proceeds, and we will pay off all the debt. So then the buyer is coming into a business with zero debt. That's the goal.
SPEAKER_01:And I well, and I think that that part of your role is so critical that a lot of buyers don't really take time to consider because if let's say, which is very common, a seller doesn't have the funds on hand to make all those payoffs on their own prior to closing, then they have to be in receipt of the purchase price in order to then turn around and pay those debts. And so the question then becomes can you trust that the buyer or the seller, I mean, is going to turn around and take a portion of those proceeds and pay off the debt when they could be arguably, you know, incentivized in a way to not do that, right? And keep the total purchase price. And then you'd have to fight them after the fact. After the fact.
SPEAKER_00:And when it happens after the fact, it's a lot harder. Absolutely. I think, yeah, the buyer and seller do need to trust each other. But when it we kind of take that that guessing out of whether or not it's gonna happen, we, you know, we will take care of all that at closing.
SPEAKER_01:A common term that's used in MA deals is funds flow or flow of funds. And one of the other things, too, that Arizona escrow essentially puts together with the closing is and kind of tied to this payoff piece of it too, is where does all the money go at closing, right? So, like you're taking in the purchase price, which ultimately anything left over from the purchase price after all the the amounts are deducted gets paid to the to the sellers. But um funds flow, I give me like the most basic description you can have for anyone listening who's like, what what is funds flow or flow of funds?
SPEAKER_00:So from the earnest money all the way to if you hear there's a lender or if you have a cash buyer, those funds come in and we hold those funds until closing, and then we have actual with the with the closing statement, it's you know, it's written out right on the closing statement exactly what we're gonna pay. It's clear to all parties where all that those funds are going and what they're gonna get at the end of the closing.
SPEAKER_01:And I that piece I think gives a lot of solace to buyers and sellers that there's no a jet hidden agenda or anything else that would obscure what's happening with the purchase price, which I think at the end, you know, sometimes there's a decent amount of money being passed around. So being able to see a line item for each thing that's getting paid out or dispersed is is helpful too. Yes.
SPEAKER_00:It I I know it gives our buyers and sellers both peace of mind. Definitely.
SPEAKER_01:So thinking about how that transactions are can be two different sizes. When you're handling a closing for a smaller Main Street deal, which is really just a colloquial term to say, you know, brick and mortar, you know, million and below, I everybody's got a different threshold for what Main Street means. Um, versus something that's a$50 million deal. How does the role of Arizona Astro change and shift based on it being a smaller deal versus a larger deal?
SPEAKER_00:Well, our role is pretty much the same, um, but there is gonna be more parties involved with those bigger deals. When we have a big MA transaction, you're gonna have you know attorneys, CPAs, um sometimes private equity, um, venture capital. You're dealing with a lot more um parties involved. So sometimes those take a little longer because it's all about that open communication with all those, yeah, all the people involved. The smaller and the smaller, you know, Main Street, um, it's usually the buyers or sellers, or sometimes they're not entities, they're just, you know, they've been running a business their entire life, a service business. And so yeah, it's sometimes it gets emotional.
SPEAKER_01:I think there's one misnomer that people have is that a smaller deal is simpler. And we both know from experience that not only are emotions high sometimes in smaller deals, but just the fact that they've never gone through a transaction, this is oftentimes the first and only time they're going to sell a business. There's a lot of unknowns. I think sometimes those smaller deals can be exceptionally complicated and slow as people are riding that emotional roller coaster. Absolutely.
SPEAKER_00:I believe that sometimes when it's just the buyer and the seller, there's a lot more time involved with them because they don't know. Um, and so there's a lot of explaining, a lot of and we're we're happy to do that. We have very open communication with with all parties.
SPEAKER_01:So when you see closings get delayed, regardless of size of transaction, is there anything common among those delays that you can share that maybe as a potential buyer or seller they could then be aware of those pitfalls and avoid them themselves?
SPEAKER_00:Yes. So lenders and landlords are probably the, and I'm not putting blame on lenders and landlords. Usually it's about a miscommunication. So if the borrower doesn't get the lender all the required documents, because they if it's an SBA, there's a lot of you know things that they need to accomplish before they can get that SBA number or the loan amount. Um, and as far as for the lender the landlords, it's just negotiating with those landlords. And a good attorney or or business broker can really help assist with those negotiations because it it could get it could we've had it happen where the landlord just didn't agree to you know transfer the uh the the lease to the new buyer and the deal canceled. So it's upsetting, yes.
SPEAKER_01:That's talking about the landlord is an excellent point because I feel like sometimes I bring up the lease really early on in transactions because of that. I've seen it hang things up, slow things down, or worst case scenario, like you said, just trash the deal altogether. And you know, we'll be just past the LOI signing, and I'll start, you know, helping with the disclosure schedules and diligence and all this other pieces. And I'll say, has anyone had a conversation with the landlord? And they're like, oh, well, we're like 30 to 60 days from closing. Like, we don't need to have that conversation quite yet. And and I always say, no, no, no, we need to start that conversation because not only can the landlord be a non-player, but I've also seen times where they just are so slow to respond. And they have so many hierarchies of like layers in there, you know, especially corporate landlords. Right. They have so many layers you don't even talk to the landlord themselves, you've got like intermediaries that you're working through. And it really, I mean, the fact that you're playing a telephone game where you've got one person who's then relaying it to like an attorney who's relaying it to the client. I'm like, this is really slowing down this process. So the sooner the better. Yes, sooner the better. Um, in terms of getting documents over to you guys, is that something that you've seen? Obviously, you know, well-organized broker attorney team or broker attorney duo is probably going to get you guys the relevant documents that you need as quickly as possible. But have you seen people drag their feet on getting you the required documents to show proof of ownership and that has slowed down a closing?
SPEAKER_00:Yes, that does happen. We have on our website we have a smooth closing checklist, which is accessible to anyone who goes on on our website, but it actually takes the guesswork at exactly what we need. I think that I mean, just being able to communicate with the buyer and seller, their information, email address, addresses, you know, phone number, um, the entity documents, that seems to be the a lot of people don't know where their entity documents are. So that that kind of slows things down. But the sooner that people can get those items to us, the better.
SPEAKER_01:What blows my mind is that there are so many very successful businesses that have been operating for 20, 40, 50 years and they don't have an operating agreement or bylaws, or they have no idea where their articles are. And for some of those really long-standing businesses, you go on the Arizona Corporation Commission and it's so old that it like gives you the little blurb as like on film or microsite or whatever they have on their website. I'm like, we can't even pull this this entity, it is so old and well established that it isn't even available online. We have to physically go down to their office and have them like pull out probably like a sheet, a clear sheet to print from. I don't even know what those look like.
SPEAKER_00:And we need that because how are we supposed to who's has the authority to buy or sell a business?
SPEAKER_01:So on a on a kind of related note, one of the issues I've seen with people who own entities that are in states that sort of hide ownership, like Wyoming, where what do you guys ask for in order to prove ownership?
SPEAKER_00:Well, there's other, you know, other ways we can can do that. Um, there is a service that that will do the little bit of investigating for us, or we just, you know, have to ask and keep asking until they get us something.
SPEAKER_01:I I feel like a lot of people don't realize that that's one major pitfall of you know opening a business in a state that does kind of hide their identity, is that anytime you want to do anything that shows ownership, you've got a million hoops to jump through. So I always warn people, I'm like, do you really need to be in Wyoming? Because that could open up a whole new can of worms, especially, I mean, even just for like banking or getting loans or things like that. So do you get involved in anything post-closing related to holdbacks? And before you answer that, we're gonna give the explanation of what holdbacks are. So in a transaction, there are times where a certain amount of the purchase price will be held back. And that can be either to cover a potential claim made from the buyer to the seller based on maybe immaterial material facts that were misrepresented. Uh, that was a tongue twister. Um, or uh kind of related to a holdback and sometimes used interchangeably an earnout, which is based off of how much revenue is made the year after closing or some other time period that's measured and specifically set forth in the purchase agreement.
SPEAKER_00:Yes. So yes. Uh in all those cases, we have situations where we do hold back funds. Um and for all those reasons, they have to know that that that money is secure and our fiduciary responsibility is to our buyer and our seller.
SPEAKER_01:And when you guys do the the holdback process, it would follow just like kind of doing the earnest deposit, right? Where, you know, you release based on certain metrics, put in the documents and things like that. Yes.
SPEAKER_00:There's in the in the contract, it'll state how long or what what different timelines, you know, there could be um or just proof that something like if it was a tax liability, um that proof that that was paid, and then that would trigger us to release some of the money or all of it.
SPEAKER_01:Okay. And then I'm gonna switch gears a little bit here. We're we're we're running through this. I have a list of questions for Monica, and and as if feel free to to dive off and talk about um unrelated or related topics that are sort of tied to these questions too. We don't have to hold to them perfectly, but um, is there, you know, in terms of one thing that lawyers or MA advisors, including things like brokers, don't realize about escrow that could save time and money, generally speaking.
SPEAKER_00:I would, you know, back to the same thing about getting us all the information as soon as possible so we have that. Um, and I think another misconception with business sales is it's not just a bill of sale. And that's what a lot of people think. And there's other documents that need to be prepared. And so that that definitely is one of those big things that people are totally missing, totally misinformed that it's not just a bill of sale. We there's a lot more to it, um, and there's a lot more liability um to handle and to deal with. So we're we're really there. We just about to celebrate our 50th year in business and congratulations. It's all about thank you. And it's all about trust and those relationships that we build.
SPEAKER_01:I'm glad that you said it because I feel like sometimes I stand on the tip top of a building shouting that this it's not a bill of sale. And I can't tell you how many times people come to me with that misconception of like, let's just put together a simple one pager. And I'm like, no, like the like to your point, the liability that sits with an asset sale or purchase is huge. And the reason why, you know, for anybody going through this process for the first time, the reason why we have a diligence period is not only for the buyer to thoroughly investigate the seller and make sure that the decision is the right decision and that they feel confident in buying essentially what the seller has represented as the business, but also for the seller to take all of the things and disclose them to the buyer so that post closing, there's no surprises. Um and I think sometimes it gets lost on clients that like the diligence process is it sometimes is skipped. And it is just a more pivotal part of the transaction that actually serves to protect both sides. Um, and so I always I always worry when when people come to me. Um, I don't get it frequent too frequently, but I do get people come to me who have sold a business in the last year, signed all the documents, and they're like, hey, can you help me? And I I'm, you know, I'm always sorry because they've signed on the dotted line, they've closed the deal, time has passed. And a lot of times the documents they've signed are lacking those protections. So when it comes to enforcing the contract, there's not much teeth to it. Right. So kind of on this related topic, in a competitive MA market like Arizona, how do you see Arizona escrow or see Ariz escrow officers adding value beyond just being a neutral third party?
SPEAKER_00:Well, our escrow officers they do create a relationship with all the parties, either the brokers, the attorneys, the buyers and sellers. And I think what's important for the escrow officers is clear and open communication. Um, being that resource that they can call to ask questions, or we are proactive. Um that's one of the things at Arizona Escrow that we do is we let we give people timelines and if something new, we keep all parties involved on an email that may not pertain to the buyer's attorney, but they're on the email just so they know what the flow. The whole escrow, you talk about the money flow, but the the actual escrow process flow.
SPEAKER_01:A hundred percent. I I work with Darcy all the time, and you know, one thing I appreciate is that she calls me, you know, and I I think in a world where communication is dominated by email exchange, sometimes it's easier and clearer to just have a phone call and to get up to speed, make sure we're all on the same page. And so that's one thing I've really appreciated about your company is it's the ability to get in contact and and to have that clear communication back and forth. I mean, it makes all the difference, especially when a deal is moving really quickly.
SPEAKER_00:Yes, yes. And then we do like to have things in writing, of course, but when we do have a phone conversation, we we do track that as well. We we make sure that we type that up in our conversation log so it is there for legal purposes later on if something does happen. That's excellent.
SPEAKER_01:Can't ever have enough uh documentation, especially in the legal process. We go through a lot of papers. I can imagine. Um, I know there's times when you guys close in person versus remotely. You know, do you have a preference? Is it really based on just party preferences? You know, I've come to your office to do in-person closings. I personally think that they're kind of nice because it's like the old-fashioned version of closing on a house where everybody sits around a table and you know, shake hands, break bread or whatever it is. But is there any preference that you guys have as a company?
SPEAKER_00:No, we don't have a preference. We usually sometimes the broker decides um what their preference. We have brokers that will only um have a in-person closing. They don't like remote closings. But after 2020 and the pandemic, 60% of our closings are now electronic because it saves people so much time. They can just do it right where they are at the office or at home. And um it does take away from the excitement of having everybody in the office and in the conference room. And um, but at the end of the day, as long as the customer's happy, that's what's important.
SPEAKER_01:When I was gonna say, I cannot believe how many people I've supported through a transaction where one side is, you know, they're kind of at the end of their ownership of the company. They have they've started to take more liberties with their time. And I can't tell you how many times someone's like on a four-week vacation in Europe and you know, sell their business from Italy. And I'm like, I mean, it must be nice, you know, to just be like, okay, I'm gonna sign on the dotted line and it'd be done. Um yeah, so I can see how closing remotely in especially in today's world uh has become kind of a pivotal part of this.
SPEAKER_00:And some of our escrow officers like the remotes better than in person, but it's a little different when there isn't real property involved. So there isn't a D to trust to record, which needs a wet or live signature. So yeah, so we're able to do that when there isn't real estate involved. Sometimes with the, you know, the lenders uh collateral property or that we still have a D to trust for, we we have to make sure we have a wet signature. But we can do a mobile notary, remote notary, and also remote online notary through our title department. So that's a that's been passed in 44 straight states. So yeah.
SPEAKER_01:Well, and I was gonna say that. I mean, that out of all the things that have changed recently, that was probably the one of the least likely, but COVID definitely was a was a factor in that. Yeah, because I feel like notary was like one of the hard and fast rules of you always had to be in person. Correct. So um tangential to this, you know, you were talking about lenders being a part of this, being a part of the advisor group that gets involved in transactions and kind of being one of the advisors that you guys interface with in the process on the way to closing. Um, when it comes to banker documents, is that something that you help clients facilitate signing, or does that traditionally come from the bank or the lender themselves and you just want to have copies of them?
SPEAKER_00:So most of the time the lenders will prepare the loan documents and we will we will sign them at closing. Some banks and some loan officers will come to the closing and sign the buyers. So if there's any question, they're there to um answer those questions. But no, they usually, if they're not gonna be there at the closing, they'll send them to us and then uh we have them all signed. So we we take care of that. We really collaborate with the lenders when it comes to that because they're busy, you know, and we already have the buyer there to sign documents, so we don't mind um doing that for them.
SPEAKER_01:Nice on that same topic of lenders and financing. You know, obviously the markets have been leaning, and the trends we've seen over the last few years is that seller financing has become a pretty pivotal part. And for anyone listening who has heard the misnomer that seller financing 100% of the deal transaction is like commonplace, I will tell you uh that is very rare. I have yet to see it. You might get a really solid deal where someone is, you know, in a spot and they need to sell because of circumstances. Is outside of their control, but for the most part, you're not going to find someone who's going to sell finance the entire transaction. But nonetheless, we have a lot of transactions that do include seller financing, a portion of it. And so when the parties have signed a promissory note or essentially a private loan from one bot, you know, from one party to the other, does Arizona escrow play a role and can they facilitate essentially payments and collections post-closing?
SPEAKER_00:So post-closing, we will take the promissory note and the collection instructions and we will set up in our loan servicing department and we will collect the payments and process those payments for the buyer and the seller. Sometimes there's brokers. We have broker notes as well. Um, and then it really makes the whole process for the buyer and seller you really don't have to think about it. They know they're, you know, they're gonna make a payment, they're gonna get a statement, they know they're gonna be getting the the deposit, but we keep track of the principal balance, you know, or the loan balance, or the taxes and insurance, and we take care of all that. So it's kind of uh peace of mind for our customers. And it's it it is an added service, but um, I think it's necessary because we highly recommend it. I think for buyers and sellers to keep track of that information, it unless they're CPAs or bookkeepers, it could be very tedious.
SPEAKER_01:Absolutely. Especially I've seen some promissory notes lately that it's not the straight up amortization over a certain period of time. I don't know why everyone is getting creative with balloon payments and re-amortization. And by the time I'm done working on a promissory note, I actually in the last five years, I feel like I've become low-key like a uh sort of a banker myself as I'm like crunching numbers trying to figure out how we re-amortize over, you know, four different principal payments and random interest payments only at the beginning. And yeah, so it's people are definitely getting creative out there with how repayment structures are being placed into promissory notes. So might might be a good reason to reach out to Monica at Arizona Escrow in order to get that handled. So I want to shift a little bit to story time in terms of what you've seen. And then after we talk about stories and being in the trenches, I'd love to talk a little bit about your story in acquiring Arizona Escrow. Sure. So, in terms of stories, you know, what's the most surprising, odd, or memorable story from your time at Escrow? And if you want to say a couple different stories, you certainly can.
SPEAKER_00:Okay. The one that came to mind was it was at least 20 years ago, we had a it was a cattle ranch in south of Tucson, and we had so it had not only real property, it had the business as well, and it had mineral rights, water rights, and this very expensive prize bull.
unknown:I know.
SPEAKER_00:When I saw this question, I knew I was like, it just like it's the prize bull one. So this bull went missing. Oh no. So we had to hold closing until the rant hands found this bull because the buyers, it was very important that they had this bull. Uh well, if he's a prize bull, I can see why. So we're like, we couldn't believe it. We're like really over a bull. But then when yeah, so it we did they did find the bull. Where was he? He was just in some ravine somewhere, just so they got him out, and yeah, he was good, brought him back to the the ranch, and everybody was happy. We signed, we closed, but that one was that one was uh most memorable to me for because of that reason, because we had so many moving parts, and we would have thought that it was either the mineral rights or the water rights or something that would have delayed the whole transaction. Yes. We I mean, we've had another one one of our largest transactions that we've done, uh, dealt with almost 60 parcels in uh in two different counties. And that was really challenging. And just trying to coordinate also water rights, um, and some of it was vacant land, and yeah, it was that that was challenging, but at the end of the day, yeah, you know, we we have some really experienced escrow officers and um very very happy to have them there.
SPEAKER_01:I can imagine Arizona and its water, I mean there's water is king, right? And so when you're handling transactions that include those water rights, is is there a lot of stopping and starting in terms of how that piece is being negotiated?
SPEAKER_00:Not not usually. It's usually in the beginning in the contract. But if it does come up in the midst of all the the process, we can put it an addendum together and put it in the addendum. But you know, uh we've had the transactions where the people sell their property, but they don't sell the mineral rights. Oh interesting. That was that was a real it's very unique. Very unique.
SPEAKER_01:So I yeah, I would say back to your original comment about how landlords can really slow a deal down, I facilitated the closing of a transaction where it was a city-owned golf course. And um the the lease on the golf course was something that had to be transferred. And to me, in my in my mind, I'm always like, I'm a big golfer, right? So when I found out that the golf course, the land wasn't owned by the sellers, and it was truly just a leasehold interest that was being transferred. And as you can imagine, having a city own it, there's plenty of red tape around the assignment and who who can, you know, show that they have the financial wherewithal to take over and continue operations. And um, it was really fascinating, but it opened my eyes. I mean, we see leasehold interest get transferred all the time in a traditional business setting, but to see it where truly the operation of the business could not continue without this leasehold interest. I mean, you know, some businesses I can see that it's very hard to move them, but for a lot of businesses, the commercial space of it wasn't to get transferred. I mean, they could probably go to a new commercial building and continue operations. It's not optimal. But um, so to see it so closely tied together was just fascinating. And of course it delayed it delayed the transaction from close to the city.
SPEAKER_00:It delays it, but yeah. I mean, like our we have a product that's pretty unique, um, a holding and disbursement account. So we will, you know, if a couple is getting divorced and an attorney doesn't want to hold the if they sell their home or a vacation home or or property or a business, we have the ability to hold those funds in escrow until the court order is finalized. And that once again puts everybody's mind at ease that we have those funds and we are very, you know, we just we go by the instructions. Yeah.
SPEAKER_01:Well, and I think anybody going through this process can agree that having advisors as part of your team, including your escrow agent, kind of be the guiding light in terms of when things start to go wrong, right? To be able to rely on them as a neutral third party to just follow the terms of the agreement when things are heated or people are no longer capable of having legitimate conversations. I mean, I worked on a transaction where people had the conversation, the communication had really broken down. And there was some lost trust in the process. And I think what's nice when you're utilizing escrow is that you can hang your hat on the fact that if your documents were drafted well by your attorney, then the likelihood that if you've put an earnest deposit down and the seller goes MIA because maybe they weren't ready to sell and they're having doubts and they've just shut down, or vice versa, maybe something came up in diligence and all of a sudden the buyer is kind of scared and they just don't want to have any more conversations. I've seen it where people just stop communicating altogether. And when you have escrow there to be sort of the the backstop when people stop communicating is is a nice way to feel like you have a lifeboat in the middle of the ocean. Right.
SPEAKER_00:Exactly. That's why we're there, you know, to help with it, you know, with attorneys and really do assist the brokers. Um, yeah, to try and be that that go-to for everybody and to know that they can trust us. So let's talk.
SPEAKER_01:We've we've covered the basics of Arizona Escrow and what they can do and why it's important to include escrow in your transaction and why it kind of makes things easier and less painful. I'd love to pivot to talk about your acquisition of Arizona Escrow. I think what's amazing is that having acquired a business yourself puts you in a very unique position to know what people are going through that come to you first, you know, your company for services. Absolutely. And, you know, I'd love to hear sort of your experience through this process and you know, share, share some sort of things that you think you would have wish you would have known, right? Um, but also, you know, did it go according to how you thought it would go?
SPEAKER_00:So in in 2020, I was um given the opportunity um to purchase Arizona Escrow through a redemption agreement um that was put in place in 2015. I there was another partner, I was a a stockholder as well, um, but our founder passed away. So going through this experience, um, I would highly recommend that you make sure your your documents are clear and concise, and everybody's in agreement at the same time because after he passed, there was some question um by with the other partner whether it uh it was it it was part of his he was gonna have to you know exit as well. And there was some question there, and yeah, at the end of the day, yes, um I it took me three years to negotiate um after his death and the process and the payments, and then 100% you know, April 2023, Arizona Escrow was 100% my company, so we're we're proud of that. We're the largest independent uh escrow company in Arizona, so that's awesome. But I would highly recommend just make sure you your documents are very thorough, very thorough, and to use an escrow agent.
SPEAKER_01:So when you we're talking about it taking three years, I think one of the things that we always talk about on the attorney side is deal fatigue, you know, and you guys see it too all the time, where the deal is just dragging on and it's taking longer than anticipated, or it takes a year and then it falls apart. And deal fatigue is like this term we all utilize where the longer it takes to close on a transaction, usually the negotiations start to break down, parties get tired, a lot of people will just quit. You know, three years is a long time to start talking and then close. Did you feel at any point that you experienced deal fatigue? And obviously you still made it to the end.
SPEAKER_00:Yeah, but well, I don't know if it was deal fatigue because I knew at the end of the day that it was gonna we were gonna get everything finalized. It was just um it was a very emotional time with our founder's death. Um after being at Arizona Escrow for 30 years, uh it was you know, it was so uh natural for me to be the one to um to buy the company because I I at the time was the CFO, so I knew everything about the company. Um and so I really part of it was probably I didn't push too hard in the beginning because it was COVID and it was we didn't know what was gonna happen. And then plus the our you know, the widow, you know, I it was definitely a very difficult, but I knew after all that was said and done that at at one some point it was going to be 100% fine.
SPEAKER_01:Well, and I I apologize guys for working through that because obviously you had the trifecta of things working against you with the heavy emotional toll of having uh you know the founder pass away and the fact that the estate is then evolved involved, COVID adding on its layers of complexity. I think, you know, to hear that you went through this through three years and then finally it all culminated. I mean, um congratulations first and foremost. Um, but I think it also goes to show, you know, people who are maybe experiencing deal fatigue right now that just because it's hard doesn't mean it's time to give up. Um and obviously not everybody has a situation where they know for certain that things will resolve, but I think sometimes people automatically take a more negative perspective on oh, well, you know, this is going really slow and we've started to stall and things aren't working, and so they'll just cut and run. And uh when a lot of time and energy has already been invested, it's it's hard to see people make that decision.
SPEAKER_00:Absolutely. I mean, I believe that the whole time I, you know, I never wavered. That was, you know, what I was gonna do. I was gonna buy the company. Um, and I feel like my vision was bigger than my fear. And I think that's what buyers just I I knew what I need wanted to do once it was mine. Um, and I I it's scary for buyers because they don't know what's gonna happen. And uh you put it there's a lot of money on the line as well. Oh, absolutely. And sellers, um they they're ready to retire when they're they're ready to go. So um, so yeah, I would I I would not have done anything any different because the way it happened, the even though it did take three years, um it the whole process was just very methodical and um we communicated and um it really um helped me understand the feelings that the buyers have coming into an escrow because they're very they're anxious to get things done and sometimes it it takes longer than they want. So yeah, you doing going through that process myself, I definitely um it opened my eyes to certain things. So yeah, it was it was eye-opening.
SPEAKER_01:Well, I appreciate you sharing because you know, a lot of people I think your story is not only a good example of persevering, and I loved the thing that you said, which is that your vision was bigger than your fear. I love that. You should make that like a byline or a quote on your LinkedIn. Um, but also this idea that when the founder passed, you had this redemption agreement to fall back on, and it governed your relationship with the business and how things were going to be sort of wound up or changed. And I think there's a lot of businesses out there that are on their path to the eventual exit, right? And not thinking about how these key organizational documents, a lot of people think, oh, just the articles, you know, just the articles is enough. And, you know, we get into these transactions and we're sort of, I always joke, we're like, you know, building the plane while we're flying it because we're throwing together the original organizational documents that should have been in place in order to secure the financing, in order to prove ownership and all these other things. And it's all fine and dandy because they're selling. And but in the worst case scenario, what happens on the way towards the exit, at some point something happens that's unplanned, or you know, people have random occurrences where disability plays a role. Maybe it's not even just passing away, disability, and then if there are no documents, I mean, if you had no redemption agreement, that deal would have been entirely different.
SPEAKER_00:Exactly. So everyone, yeah, there was there would have been so much uncertainty of our future. Absolutely. Um, I highly recommend business owners have something in place um upon either retirement or death. Yeah, it's important.
SPEAKER_01:Well, I appreciate you sharing it. I think uh it's a good cautionary tale for business owners who are missing their organizational documents. I think it's also a great uh motivational story as well about persevering in the face of difficulties and not letting not necessarily hurdles, but some friction get in the way of what you have envisioned for yourself. So um is there anything else that you would like to share in terms of you know what's the best way to get in touch with Arizona Escrow? Um close by telling us also about your podcast.
SPEAKER_00:Okay. So you can reach us at uh 602-956-2629, or you can go to our website and look at our services. Um you can send us um an email at info at arizonaescrow.com. We have a smooth closing checklist on our website as well, uh, a fraud prevention uh section to help people with that. And I have a podcast on the top of the website. There's a link. Um it's practical and positive leadership. I've been doing this for almost two years, and Paloma was recently on my podcast as a guest, and it was amazing. We had so much fun.
SPEAKER_01:That's why Monica's back on my podcast. We're just exchanging podcasts. Well, I really appreciate all of the details you've shared with us today. Thank you so much for being a guest. Thank you, Paloma. I appreciate it. Thank you for listening. Comment, like, and share, and be sure to tune in next time. In the world of business, not all deals are what they see. Fortunes rise, empires crumble, all with a stroke of a pen. Mergers, acquisitions, and hostile takeovers. Welcome to Mergers Chapter, where we examine strategies and stories behind the biggest idea in the business. Because in MA, real risk is