HM Insights

Legal Eagles & the Dragons Den - Why the devil is always in the detail of a deal

Welcome to our weekly Dragons Den blog where a member of Harper Macleod's 'Legal Eagles' entrepreneurial team will share their view of the latest episode, give some hints and tips and also explain how we could have helped … and hopefully, have a bit of fun along the way. This week's blog is by Paula Skinner who is head of our entrepreneurial team and has vast experience of equity investments. Paula previously worked in-house at a venture capital organisation and her team has completed more than 90 equity deals in the last three years.

Legal Eagles & the Dragons Den - Why the devil is always in the detail of a deal


The first episode of the latest series was full of consumer-related businesses, from cosmetics to food and drink to pet food, but the most exciting thing from my perspective was that there was a new Dragon who was eager to make her mark from the start. I liked Sara Davies' style and her straight-talking, albeit I didn't necessarily agree with everything she said (but hey, that's life).

Don’t judge an offer by its "valuation"

Cosmetics business "Tancream" was first up and managed to negotiate a better valuation with the Dragons than Sara's hefty initial request for 40%. They ended up on a dual deal with Touker Suleyman and Sara for a combined 25%, giving their business a pre-money valuation of £300,000.

It's important for entrepreneurs to really consider the overall terms on offer and not get stuck on valuation only – which is something we often encounter when we start working with a business. We encourage entrepreneurs to speak with us at as an early a stage as possible so we can explain the terms that are reasonable and that they should expect. Investors in different jurisdictions have different peculiarities and requirements, which can take entrepreneurs by surprise if they aren't prepared for those. Advisers such as us can add value and help if we are involved at an earlier stage and can also introduce you to a large network of investors, given our background and experience in this sector.

Diabolical investment deals

Next up was a devilish product, literally, and watching Dragons Den reminded me why my team and I love our jobs so much – it's the variety of businesses you deal with on a daily basis. To go from working with a cosmetic product to a devil-themed drink, like Claven Hoof Rum, is exactly the kind of thing that happens in my day job as it involves dealing with all types of entrepreneurs.

Unfortunately, this entrepreneur was unsuccessful in getting an offer mainly because of earlier investment deals he had entered into. He had made the business uninvestable because of the terms he had offered to existing investors. A huge part of our job is trying to consider what a business may do in the future. We don't have a crystal ball but we have worked with a large number of businesses and can point out terms of deals that may cause an issue with future investors and/or purchasers. We're always telling entrepreneurs that they need to not only consider the "here and now" but also think about what future investors may think.

All you need is love?

The final business that caught my eye was Scrumbles - a pet food business that was founded by a husband and wife team. The first thing that the unromantic side of me considered when they walked in was "what happens if they get divorced?", and sure enough around halfway through their pitch, dragon Peter Jones asked the same. 

The couple's romantic but possibly naïve response was that "it will never happen to us" … Unfortunately, we all know friends, family, colleagues or business partners who have gone through a divorce and it's not nice, it's not cheap and it can be very unfriendly – to a business as well as the relationships. We recently covered Business and Divorce in a previous blog which you can view here.

However, if plans had been put in place from the outset, the business could be protected. We would recommend that difficult discussions are held at the outset of a business venture to consider these areas as, all too often, we've seen businesses fail to meet their potential as a result of an issue such as this which could have been avoided had they taken advice. 

Incidentally, this business received an offer from the Dragons that the husband politely declined, much to the annoyance of his wife who then debated this with him as they made their way down in the lift afterwards - so perhaps life wasn't as rosy for this couple after all …until declaring on twitter, that although their website was down due to an influx of traffic off the back of their appearance on the show, they are in fact still together

Get in touch

Please get in touch if any of the issues discussed above are things that you might need to take advice on.

Click here to view corporate partner Jo Nisbet's views on episode 2.

Useful links 



corporate law

Entrepreneurs, Growth & Investment