Avoid an acquisition ‘blow up.’ Find smart legal partners

Relying on online legal services for your startup is akin to diagnosing yourself with a medical illness via WebMD. At least that’s the mentality of George Nemphos, a founding partner of the Baltimore-based law firm Nemphos Braue.

“It’s amazing how frequently entrepreneurs in early-stage companies think, ‘I don’t need advice.’ They all think everything’s online,” Nemphos said. “At Nemphos Braue, we aim to build partnerships with all of our clients. It’s a quality of service you can’t find on Google.”

Nemphos and Tim Braue left corporate law firms to found Nemphos Braue in 2016. They provide startups and small businesses premier legal counsel. The Nemphos Braue team operates in several practice areas, including private equity, venture capital and independent sponsors; intellectual property and mergers and acquisitions.

When Ed Sealing’s Columbia-based company SealingTech was poised to acquire a fellow cybersecurity firm, Nemphos was Sealing’s first thought for counsel. SealingTech, which develops cybersecurity training and equipment for the US Department of Defense (DoD), acquired Quark Security in 2019. It was SealingTech’s first acquisition.

“After I discussed the topic with Brandon Whalen, the CEO of Quark Security, the first person I dialed was George,” Sealing said. “What might have been a complex process, George helped make an easy one.”

“George is a straight shooter,” Sealing added. “A lot of attorneys’ go-to answer is ‘Well, that depends.’ George’s answer is always ‘Here are the three ways you can do it. Here are my recommendations. Here are the other reasons why you might not want to do it.’ He paints the entire picture and gives his advisement.”

Sealing was interested in Quark Security because of a high-security software the firm developed for the DoD. SealingTech also gained the “niche expertise” of Quark Security’s team. Whalen of Quark Security and Sealing were close business contacts before the acquisition, Sealing said, so he felt confident Quark Security and SealingTech’s cultures would mesh well. But he still needed assistance — bringing him to Nemphos.

There are common complexities businesses must navigate when they come together during an acquisition, such as differing tax and benefit structures, corporate securities, and compensation matters.

The biggest obstacle companies face during an acquisition is merging two separate teams and company cultures under one umbrella, Nemphos said.

“I cannot begin to tell you how often we see integration just blow up when you’re wasting a bunch of days where everybody didn’t say everything they needed to say up until the day that money was wired, and then all hell broke loose,” Nemphos said. “Having conversations about uncomfortable topics during an acquisition won’t be disruptive if you really take the time to strategize on the integration.”

The Sealing Tech team at their office. (Courtesy photo)

SealingTech’s acquisition of Quark Security was a shining example of how integrations should go, Nemphos said. Quark Security’s entire team was retained during the acquisition, and Nemphos estimated the two businesses were fully acclimated in about four to five weeks.

“You have to start thinking about integration the day you start thinking about the acquisition. Integration does not happen without hard work and planning, and Ed did a great job of mapping that out,” Nemphos added.

Sealing credited the smooth acquisition to Nemphos’s guidance. While developing the nitty-gritty of the acquisition’s documentation, Nemphos counseled Sealing on the conversations to have with Quark Security. Sealing had ideal goals, and Nemphos “reverse-engineered the process so we could reach that outcome,” Sealing said.

A couple of years after the acquisition, Sealing continues to rely on Nemphos Braue’s counsel for matters such as contract negotiations.

In its 10 years, SealingTech has worked with corporate law firms and small boutique firms, but Nemphos Braue stands apart from the rest, Sealing said.

“For me, SealingTech is my entire life, right? There’s a lot of passion in it, and you want to deal with somebody that understands that,” Sealing said. “At Nemphos Braue, you’re not looked at as lines on a paper. You’re actually talking to a person like George, who understands that passion.”

Working with entrepreneurs is Nemphos Braue’s specialty, Nemphos said. He’s learned that entrepreneurs don’t like being told what to do when it comes to any counsel — the DIY mindset is why they became an entrepreneur in the first place.

That’s why Nemphos Braue approaches each of its clients with a collaborative mindset. The firm wants all of its clients to feel like true partners, Nemphos said.

“A lot of advisors act like they walk above their clients,” Nemphos said. “I would prefer to be part of your team in the background, whispering in their ears and helping guide them on the journey that they’ve chosen. At times, you have to run in front of them and hack at the weeds to clear the way. But if you’ve got the right relationship, that path unfolds in front of you together.”