MSN Law Office

Business Acquisitions
Columbus, Ohio

Letters of Intent
Due Diligence
Asset Purchase Agreements
Stock/Membership Interest Purchase Agreements
Deal Financing
Buy-Sell Agreements
Merger Agreements
Franchising
      Franchise Disclosure Documents
      Franchise Agreements
      Business Opportunity Plans

Business Acquisitions

PRACTICE AREAS

Business Acquisitions

There are many reasons why you may one day decide to sell your business or buy an existing business. Whether it’s time to retire or simply move on to life’s next great adventure, selling a business (or buying into an existing business) is a complex transaction that requires good legal advice and customized, well drafted contracts.

Our business attorneys can represent you every step of the way whether you are the purchaser or the seller. In addition to preparing letters of intent and purchase agreements, we can also advise business owners with more internal transactions, including buy-sell agreements, membership interest transfer agreements, and shareholder agreements. And when the end finally does come, we also assist with winding up and dissolving the business. 

Long term, we also recognize the importance of business succession and disaster planning. Good succession planning should take place years before you consider selling your business. And if the pandemic has taught us nothing else, it has reminded us that every business, no matter how small, must have a plan in place for dealing with the unexpected. 

Buying or selling a business, or even a share of a business, is a complex transaction that requires sophisticated legal counsel. Whether it’s time for one of your business partners to move on or you’re buying or selling the entire business, we can help you get your money’s worth, negotiate all the little details, and minimize the legal risks.

Are you getting everything you think you’re supposed to get with the purchase? So many business assets are “intangible.”

As a buyer, how do you minimize the risks you might be exposed to if the seller hasn’t been entirely forthcoming about the business?

As a seller, how do you make sure the buyer doesn’t come back and blame you if they’re not as successful as they had hoped?

You’ve figured out the basic terms of the deal, but now the other side has presented an extensive purchase agreement with so many “little details” you had never even considered. How do you negotiate these details? Which ones really matter?

You’ve worked hard to build your business. Are you really getting what the business is worth?

Or, you’re buying a business. Is it really worth the price the seller is asking?

With so many people potentially involved (employees, vendors, attorneys, accountants, etc.), how do you ensure a smooth transition?

What steps are involved in buying or selling an existing business?
Once you have found a business that you are interested in purchasing (or a buyer interested in purchasing your existing business), there are still a number of steps that have to happen before the deal closes. Even when prospective clients think they’ve worked out all of the key terms of the deal, there are usually numerous fine details to negotiate before everything is truly done.

1.  Agree on a purchase price. While the parties can spend the money on a formal business valuation, the expense may be overkill in some business situations. A formal valuation will cost at least a few thousand dollars. In some situations, that may be money well spent, but often, specific factors are driving the sale of the business, i.e., the seller’s desire to retire or the buyer’s desire to expand an existing business through acquisitions. Factors like these will have a much greater effect on negotiating a purchase price than any formal valuation report. At the end of the day, the only number that matters is what the buyer is willing to pay and what the seller is willing to accept. Read more: Five Things to Consider Long Before Selling Your Business

2.  OptionalSubmit a Letter of Intent.

3.  Complete due diligence. Due diligence typically refers to the buyer’s investigation of the business or assets that are being purchased. This often includes a review of the seller’s financial statements and key contracts, checking for liens on the assets or other litigation that might impact the business’s prospects, making sure the business has the required permits or licenses to operate, confirming that intellectual property is registered to the business and the related rights will be enforceable, reviewing employment-related information for key employees and contractors, and obtaining any other information the buyer needs to feel confident in moving forward with the deal.

4.  Negotiate and draft the Business Purchase Agreement.

5.  If necessary, working with the buyer’s bank to finalize bank financing. Alternatively, if the seller is financing the deal, then the seller will likely insist on various ancillary documents to secure any amounts owed to the seller.

6.  Prepare related ancillary agreements. Depending on the terms of the deal, how it’s being structured, and whether new business entities are being created, the final deal will likely involve more documents than just the purchase agreement. Common ancillary agreements include:

  • Bill of Sale and Assignment Agreement: This relatively brief agreement confirms that the assets covered by the purchase agreement and the purchase price (or initial payment) did in fact exchange hands. Think of it like a very formal receipt.
  • Escrow Agreements: Most often used in real estate transactions, these agreements typically confirm that a down payment has been deposited into an escrow account and under what circumstances the down payment may be returned to the buyer.
  • Non-Disclosure/Non-Compete Agreements:Non-Disclosure Agreement may be required early in the negotiation process before the seller will provide confidential information about the business to a potential buyer. On the other hand, the buyer will typically ask the seller to sign a Non-Compete Agreement so that the seller doesn’t start a competing business and simply take all of their former customers or clients down the street. (This can also be incorporated directly into the purchase agreement, along with a non-solicitation provision.)
  • Personal Guarantees: If the buyer is a business entity, the seller may require the individuals who own the business entity to personally guarantee any amounts due to the seller or other legal obligations of the buyer.
  • Security Agreements: If the seller is providing financing for the deal, they will often take a security interest in the assets to ensure the buyer meets their payment obligations. If done properly, the seller will have a lien on the buyer’s assets until the underlying loan is repaid in full.
  • Service or Transition Agreements: These agreements are used to document what obligations the seller has to assist with the transition of the business or its assets to the buyer and whether or not the seller will be provided additional compensation for such services.

In addition, new business entities may need to be formed, and if the purchase involves a franchise, franchise disclosure documents and agreements will also need to be reviewed.

7.  Finally, close the deal. Agreements are signed, the purchase price (or at least an initial payment exchanges hands), and assets/stocks/membership interests are exchanged.