The Definitive Acquisition Agreement: Part 4 – Ancillary Agreements

Typically, the purchase agreement will contemplate other agreements that are either included as exhibits or negotiated between signing in closing -- so-called "ancillary agreements" or "ancillaries" for short These may include: Lease DocumentsAn assignment of the existing lease or entering into a new lease (especially if the seller separately owns the property used by the business). Employment and Other AgreementsIf Read More

The Definitive Acquisition Agreement: Part 3—Closing Conditions and Covenants

                  Overview In this post, we return to key components of purchase agreements, this time focusing on closing conditions and covenants.  Closing conditions set out the contingencies for when the parties must go through with – or “close” – a transaction.   Covenants are obligations that the parties have between signing and closing and Read More

The Definitive Acquisition Agreement: Part 2 – Indemnification Provisions

Overview Indemnification rights give the purchase agreement’s representations and covenants teeth, imposing liability on the seller (or sellers) for the buyer’s losses due to the reps not being true or the covenants not being fulfilled.  Usually, these provisions are heavily negotiated, with the buyer wanting full, long-lasting protection, and the seller wanting narrow, short-lived indemnification obligations.  Some Read More

The Definitive Acquisition Agreement: Part 1 – Purchase Price + Reps

The Heart of the Deal The definitive acquisition agreement – whether a stock purchase agreement, an asset purchase agreement, or a merger agreement – is where the transaction terms from the LOI are implemented in a negotiated, binding manner. In large transactions, it’s customary in most deal processes for the buyer to prepare the first draft of the acquisition agreement. In small-business transactions, usually the Read More

Due Diligence

Conducting a due diligence examination is a fundamental part of buying a business.  Without conducting diligence, a purchaser has no way of knowing whether the business is as presented.  Typically, the buyer will send the seller a due diligence request list that will ask for the following, among other things:  Business Calls and meetings between the purchaser and the seller, the seller’s management team, and Read More

Letters of Intent (LOIs)

After initially exploring a transaction but before conducting a full due diligence inquiry, the parties will usually enter into a letter of intent (LOI) or term sheet.  A carefully prepared and negotiated LOI will establish critical deal terms prior to drafting and negotiating the definitive agreements.  Getting an appropriate LOI in place makes sure the parties really have the foundation for a deal in place and Read More

Deal Structure

Asset deal? Stock Deal? 338 Election? Reverse triangular merger? F-Reorg? Installment sale? “Deal structure” refers to how a business sale is organized or “structured.” Buyers and sellers have options when deciding how to structure a deal. For most lower middle market businesses, asset deals usually make sense, although stocks deals and more complex structuring may be appropriate depending on the Read More

Your M&A Deal Team

Your Deal Team For both buyers and sellers, you need the right team to get the deal done right: M&A Advisor A business broker, investment banker, or other M&A advisor can advise on many aspects of the transaction. They can also help you market your business to potential purchasers and help you identify potential acquisition targets. They can also assist with valuations, diligence, and other aspects Read More

The M&A Process

It’s A Big Deal The decision to consider buying or selling a business is a big one and can be motivated by as many factors as there are buyers and sellers. For the purchaser, it can be the chance to start working for herself or it can be a way to grow and expand. For the seller, it can be the path to retirement or freeing up cash and time to pursue other opportunities. The Process Business sale and purchase Read More

CA “Friendly PC” Model at Risk – Part 2

In Part 1, we provided a quick history of a California state bill (SB-642) that was placed on hold after passing through the California Senate Committee on Health. The bill was intended to further limit the role of management services organizations (MSOs) in California. Even though it was put on hold, this bill will likely reappear in an amended form during the next legislative cycle. In this post, we will give a Read More