| Paperwork, specifically legal documents, is a | | | | want to |
| prerequisite to | | | | incorporate in their legal due diligence and |
| buying any business. It doesn't make any | | | | documentation |
| difference if you buy | | | | fulfillment:Astute business buyers never present |
| a business once in your life or do it all the time, | | | | an offer to purchase |
| every | | | | a business without preceding it with a nonbinding |
| business acquisition purchase contract is different | | | | "Letter of |
| and | | | | Intent" to purchase. (If you are not familiar with |
| requires intense scrutiny on the part of the | | | | the |
| business buyer, | | | | purpose or advantages of use of a "LOI", you |
| much more so than the business seller.As a | | | | must research |
| business buyer, each and every sentence within | | | | this topic)Never make a purchase offer and |
| the business | | | | certainly never sign a |
| purchase contract needs to be read, understood | | | | purchase offer or make an earnest money |
| and agreed to | | | | deposit until after |
| before you sign on the "dotted line". This article | | | | you completed most of the due diligence |
| will give | | | | required to |
| the business buyer a quick "fly-over "of the | | | | effectively evaluate the business for sale.No |
| most significant | | | | business purchase terms should ever be |
| concepts one should understand relative to | | | | communicated to |
| development and | | | | the business seller without a written statement |
| eventual execution of any business purchase | | | | from the |
| contract."He Who Writes, Wins!"If you have been | | | | business buyer to the seller, specifically |
| consistently exposed to business contracts in | | | | documenting, |
| your career, you quickly learn to appreciate the | | | | "that any, and all, purchase terms are subject to |
| concept that, | | | | analysis, |
| in development of most complex business | | | | justification and confirmation by an independent |
| agreements, "He who | | | | business |
| writes, wins!" Any attorney will tell you that it is | | | | appraisal entity, employed and paid by the |
| always in | | | | business buyer".Be suspect of "canned" business |
| his, his client's, best interest to be the author of | | | | purchase contracts |
| the | | | | provided by the seller's broker or representative, |
| business contract to be signed in a two party | | | | they are |
| agreement. As a | | | | typically "seller biased"Be sure to negotiate a |
| business buyer, you want to be the writer of | | | | reasonable time period to evaluate |
| the purchase | | | | and approve all documents provided to you from |
| contact. If you personally cannot effectively | | | | the business |
| write one, invest | | | | seller or their representative for your required |
| the money and have a competent contract | | | | due |
| lawyer write a purchase | | | | diligenceInvest in an environmental analysis of the |
| contract on your behalf. If the business seller, or | | | | business |
| their legal | | | | premises and keep the business seller "on the |
| counsel writes the business purchase contract be | | | | hook" for any |
| sure you and | | | | future environmental $ penalties or negative |
| your attorney evaluate every detail within.Always | | | | consequences |
| Maintain a "Paper Trail"Given the extraordinary | | | | realized as a result any documented negative |
| amount of capital involved in most | | | | environmental |
| business mergers or acquisitions, coupled with the | | | | conditions made prior to the sale of the |
| wide range | | | | businessIf something does not make sense to |
| of people, conversations, meetings and iterative | | | | you, ask, make sure |
| business | | | | you understand every detailUtilize all the |
| evaluation steps involved to effectively buy a | | | | expertise available to you from your |
| business, it is | | | | intended primary lender on the dealIf there are |
| imperative for the business buyer to maintain | | | | noteworthy levels of inventory and assets |
| ongoing, copious | | | | involved, inspect each item and use credible |
| notes of all related events and communication | | | | valuation |
| exchanged between | | | | expertise to determine approximate market |
| themselves and the business seller or their | | | | value. This can |
| designated | | | | represent significant dollars to you in the future |
| representative, throughout the purchase | | | | as the |
| process.There are three significant advantages for | | | | business owner.All current legal encumbrances or |
| the business buyer in | | | | extraordinary |
| maintaining a paper trail of notes during the | | | | liabilities should remain the responsibility of the |
| purchase process: | | | | business |
| 1) All key agreement points can be traced to a | | | | sellerAny discovered misrepresentations |
| specific buyer/ | | | | associated with |
| seller conversation, 2) If something is written, it | | | | documents provided by the seller or their |
| can be | | | | designated |
| improved upon by either party, if it is not | | | | representative to the business buyer, that |
| documented, the | | | | surface in the |
| likelihood of refining the content is significantly | | | | future operation of the business should remain |
| reduced, 3) | | | | "fair game" |
| Sometimes related records can be incorporated | | | | for financial resolution, from the seller to the |
| into the final | | | | buyer, post |
| business purchase contract as an addendum or | | | | purchaseAll records provided by the seller or |
| attached exhibit"Buyer Beware!"As a business | | | | their designated |
| buyer, you like to think that all business sellers | | | | representative, to the business buyer should |
| are honest, forthright and have genuine intentions | | | | become an |
| of | | | | purchase contract addendum or exhibit and be |
| developing a mutually beneficial business purchase | | | | subject to |
| contract. | | | | seller warranty of accuracyLastly, there are |
| Most business sellers are! However, like in any | | | | published business purchase contract |
| complex asset | | | | content "checklists" available, take the time to |
| purchase agreement, neither party knows what | | | | review |
| negative future | | | | these, especially business seller warranties and |
| consequences may surface in the ownership of | | | | representationsTypical business purchase |
| the sold asset. | | | | contracts prepared by business sellers |
| More often than not, in a business purchase | | | | or their representatives often contain many |
| contract, it's the | | | | provisions which |
| business buyer who exclusively must address the | | | | are dangerous to business buyers. In many |
| problem not | | | | cases it is not what |
| thought of or included in the final purchase | | | | is written that is of greatest concern, it is what |
| contract. The | | | | is omitted |
| negative consequences of many common | | | | that represents a potential time bomb that will |
| business misfortunes can | | | | eventually |
| be reduced, shared between the business buyer | | | | explode long after the business seller has left |
| and seller, or | | | | town with your |
| eliminated altogether with proper business | | | | money. Take the time, invest the money, |
| purchase contract | | | | expend the necessary |
| contingency languageFundamental Business | | | | thought required to structure a mutually beneficial |
| Purchase Contract ConceptsListed below are | | | | business |
| some fundamental business purchase contract | | | | purchase agreement with the business seller! |
| concepts that any prudent business buyer will | | | | |