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A business acquisition, in most cases, involves the purchase of a business by a buyer from a seller. The transaction involves buying the shares of a corporation or the assets of the business. The purchase of the shares of a corporation means that the buyer will end up with the ownership of the corporation. The corporation will remain intact and the new owner will need to be certain that what has been bought is what was contemplated and that there are no new surprise liabilities of the newly bought corporation. A purchase of assets from a business, does not give the new owner anything other than the particular assets being bought and sold.
The most important factors in a business acquisition is to be certain that, prior to the close of the transaction, the purchasing party has as much information as possible relating to what is being acquired. A buyer does not want to be surprised after closing to find that there are hidden liabilities or those that were not expected. From the seller's point of view, the seller does not have to disclose anything other than what the seller has agreed to in the Agreement of Purchase and Sale.
Considering a business acquisition?
If you’re considering a business acquisition or a merger there is a myriad of information that must be reviewed and analysed to ensure a beneficial outcome of the business transaction.
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Is the business being acquired making money?
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What kind of taxation impact will you expect upon acquiring the business; the disposition and purchase must be correctly arranged.
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How difficult will it be to qualify for a business acquisition loan if you require one?
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Is there an experienced member on your team to prepare a business acquisition agreement or letter of intent, commonly referred to as a LOI?
Business Acquisition Agreement Letter
In order to finalize the acquisition transaction an Agreement of Purchase and Sale is needed and requires tailoring specifically to each and every deal being undertaken. However there are some key points every solid acquisition letter will contain:
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Closing and termination provisions
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Conditions to the Purchaser’s obligation to close
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Conditions to the Seller’s obligation to close
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Covenants of the Seller
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Representations and warranties of the Seller
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Representations and warranties of the Purchaser
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Stock provisions
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Financial Terms of the Transaction
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Indemnification clauses
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Other clauses (such as expenses, common trade agreements, finder’s fees etc.)
As the success or failure of your business transaction rests on the complexity and correctness of the Agreement of Purchase and Sale, selecting an experienced professional to perform due diligence on researching your acquisition target is imperative.
David Himelfarb is a well versed, ethical and effective legal practitioner and strategist. His goal is to provide his clients with the greatest benefits and cost advantage while maintaining a professional, caring and understanding manner.
If you would like to contact David Himelfarb’s for a free consultaion to discuss potential business acquisitions you are undertaking, or for other legal matters, you can visit him on his website at www.himelfarb.net. |