For many clients, the sale of a business or the purchase of a business may be one of the single most important transactions of their careers. Attorneys at the Firm have represented numerous sellers and buyers in this process. The purpose of this section is to give you information about the process and some examples of documents and lists that may be used in a transaction involving the sale of a business.For a more detailed explanation you may want to go to our M & A College presentation.
In most sale transactions, the first document a buyer or seller sees is a Nondisclosure Agreement.
Under an agreement similar to the one attached, the seller and buyer agree to share information about their businesses on a confidential basis. Many parties will prepare a list of documents that they would like to review as a part of their "due diligence."
For an example of a Diligence List for a typical deal - Click Here.
After information is shared and general terms are discussed, the parties may enter into a letter of intent or memorandum of understanding which sets forth the general terms of the deal. The parties may decide not to use a letter of intent and go directly to a definitive agreement for the sale or purchase of the business. The letter of intent generally, but not always, describes the purchase price and certain other key economic and procedural terms that form the basis for further negotiations. A buyer and seller fully expect that the letter of intent will be superseded by a definitive written acquisition agreement.
Some sellers and buyers of businesses will engage a broker or finder to help facilitate a transaction. Usually, such person is paid on a commission basis and will require the interested company enter into a Finder's Agreement.
Once the general business terms are understood, the parties will then ask an attorney to prepare a definitive acquisition agreement, which will bind the parties in a sale. The usual definitive acquisition agreement will contain the terms of the sale and the purchase price to be paid, certain representations by the parties about their business, covenants by the parties with regard to the sale of the business, conditions that must be met for the parties to close the transaction, indemnification provisions to protect the parties and a closing date for consummating the sale. Definitive acquisition agreements are usually negotiated among the parties and their counsel. They cover a number of complex issues including legal, tax, accounting and business matters. Parties are encouraged to engage counsel to review these documents to be sure they understand their terms.
Selman Munson & Lerner attorneys have extensive experience representing companies, stockholders and other parties in the sale or merger of their businesses. We have handled sale transactions ranging from $100,000 to over $645 million, involving both private and public corporations. We look forward to discussing with you how we might be of help.