The purchase agreement is key in M&A transactions, detailing conditions for closure, business terms, asset delineation, due diligence, post-closing recovery, and transition covenants. Styled based on the transaction (asset, stock, merger), it's drafted post-due diligence, varying in length. It includes parties involved, assets, liabilities, purchase price details, closing process, representations, warranties, tax matters, other covenants, indemnification, and miscellaneous provisions. Structure is driven by buyer and seller preferences, affecting asset or stock purchase decisions and tax implications.
Selling your business is not just about finding a buyer and agreeing on a price. Once the basic terms of the deal are agreed upon in a letter of intent, the buyer will want to sift through your business and legal records with a fine-tooth comb. This meticulous review of your business from contracts to customer lists is called due diligence. Due diligence allows the buyer to uncover risks when buying a business.
Due diligence is the buyer’s process of discovering and evaluating information about a seller’s business to confirm that acquiring the seller’s equity or assets is a sound investment. However, the process of conducting due diligence differs between transactions for a variety of reasons. Factors such as the deal structure (equity purchase versus asset purchase), cost, the unique qualities of the seller, and time constraints affect how the buyer’s deal team approaches due diligence.
This blog post discusses the importance, elements, and exceptions of non-disclosure agreements (NDAs) when selling a business. Key points include the priority for sellers to sign an NDA before disclosing sensitive information, the necessity for clear definitions of what the NDA covers, guidelines for sharing information, the term length of NDAs, and remedies in case of a breach. Despite its protection, enforcing NDAs can be challenging, advising selective information sharing.
The process of buying or selling a business involves several key stages including buyers and sellers finding each other, confidentiality agreement signing, due diligence, drafting letters of intent and transaction documents, closing the deal and post-closing. Having a deep understanding of these steps can lead to a more efficient transaction and better results.
