News regarding independent contractor misclassification considerations continues to make headlines. Among the many reasons that industry leaders follow these developments so closely is their potential to materially impact a business’s sale—both for a seller or a buyer.

Findings relating to an independent contractor program (and potential liability exposure) can lead to modifications to the transaction’s financial terms, such as requiring hold-backs, specific indemnity, or carve-outs. These findings can also drive exclusions to a reps and warranties insurance policy. However, there are steps, either as seller or buyer, that can be taken to avoid some of these challenges.

When preparing to bring a company to sale, the seller should take stock of the state of its independent contractor program and resolve any uncovered shortcomings before a potential buyer conducts due diligence. Scopelitis frequently assists clients with these pre-sale audits, which can also expedite the diligence process by resolving such shortcomings, making the transaction less likely to get mired in diligence.

As the buyer, companies should ensure they have engaged specialty transportation counsel that can conduct a due diligence review of the target’s contractor program and uncover any “landmines” that can be addressed either in the transaction’s purchase agreement or resolved by seller prior to closing.

The Firm’s Mergers & Acquisitions team routinely advises clients on these matters, either as specialty transportation counsel or as primary “deal” counsel. Scopelitis Partners Greg Feary, Andy Light, Jay Robinson, Todd Metzger, or Katie Feary-Gardner can help you learn more about the Firm’s M&A due diligence and audit portfolios.