In any sale of a business, there are a number of documents that are negotiated and delivered by the parties, the principal of which is the Purchase Agreement. This is the contract that contains the “guts” of the deal and is what the parties will likely spend the most time negotiating. The name and format of the Purchase Agreement depends on the transaction structure. Typically, sales of businesses are structured as assets sales, stock sales, or mergers, so the agreement may be called an “Asset Purchase Agreement,” “Stock Purchase Agreement,” or “Merger Agreement.” To learn more about the distinction between these types of agreements, click here and here. While there are various technical and legal differences and other nuances among these different transaction structures, all of these agreements share a number of provisions in common. For the sake of simplicity, this discussion will refer to the agreement as the “Purchase Agreement.”
Typically, but not always, the buyer will prepare the first draft of the Purchase Agreement and submit to the seller and its advisors. As with any negotiated transaction, the relative bargaining power of the parties, their respective goals, and the experience and sophistication of their advisors will drive the direction and results of the negotiations.
The Purchase Agreement can be broken into five categories: (1) Business Deal Terms; (2) Closing Requirements and Mechanics; (3) Disclosure Provisions; (4) Risk Allocation Provisions; and (5) General “Boilerplate” Provisions.
To learn more about selling your business, check out this webinar from the expert faculty of Financial Poise. For an in-depth discussion of negotiations in a merger & acquisition deal, we recommend this webinar and this webinar.
Rob is a member of Levenfeld Pearlstein, LLC’s Corporate & Securities Group and has been with the firm since its inception. Rob helps clients structure, negotiate and close complex business transactions. He also serves as outside general counsel for a number of businesses in the middle market across a variety of industries, including: technology, cloud…
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