In the 1960s, 1970s, and 1980s, “handshake deals” were considered as good, if not better, than a written contract. In fact, a written contract could often be considered a sign that one person didn’t trust the other person, and that would introduce all sorts of aspects of honor, integrity, and social standing in the business community.
There is a resurgence in the business community to revive the “handshake deal,” to the detriment of one partner. The savvy business owner understands the value of Due Diligence when considering certain expansions, such as taking on new partners, mergers and acquisitions, bailouts, or joint ventures.
The desire to take it on as a handshake deal is understandable- it’s fast, demonstrates goodwill and trust, and costs nothing upfront. Unfortunately, such partnerships are like May-December romances that fizzle out for one reason or another, leaving one of the partners with a massive loss of money (often hundreds of thousands of dollars) because they did not want to pay for a Due Diligence investigation or create a legal agreement.
In speaking with business owners about why they did not want to conduct a Due Diligence investigation beforehand, the answer was almost always, “I didn’t think I needed that. I know this person,” or “I was comfortable with them,” or “We had an understanding.” These are all good reasons, but they are not facts and do not provide protection. In conducting a Due Diligence investigation after the fact, the now-plaintiffs were often astonished to find out the people they thought they knew had extensive records of preying upon people such as themselves. Had they paid upfront for a Due Diligence investigation, they would have saved themselves a great deal of time, money, and effort.
Due Diligence investigations should not be considered a social “slight” against a potential business partner. It is not a personal attack but the cost of doing business and providing asset protection.
Before doing any business handshakes, contact us today at 720-305-6610. Let’s discuss conducting a Due Diligence investigation to protect your assets.