Deciding to buy or sell a business can be an anxious time for both the buyer and the seller. The buyer may have dreamed of owning a business for a long time and spent many months researching until finding the seller. On the seller’s side, they may have operated the business for many years and it is time to move on to retirement.
Both sides share the goal of closing the sale, but too often the haste to close results in important issues falling through the cracks, setting up future litigation.
As a result, we advise our clients to step back and think about the big pictures and develop a checklist of the issues that must be addressed in order to have a smooth closing and transition. One of the most important components of that checklist is negotiating the Asset Purchase Agreement.
An Asset Purchase Agreement sets forth the agreements between the buyer and the seller for the sale of certain assets. Examples of the issues that must be considered when negotiating an Asset Purchase Agreement are:
- What are the assets to be sold?
- What assets are excluded from the sale?
- What is the purchase price? How will it be allocated?
- Who is responsible for outstanding liabilities?
- Are the taxes current?
- Are there contingencies to the sale such as the buyer qualifying for financing or receiving the approval of the landlord to take over the lease?
- Are there any liens on the assets?
- Are any leases being assigned?
- At the time of closing, will there be any unfilled orders or projects by the seller?
- Are there any licenses associated with the assets? Are they transferable?
- Is the buyer required to put down a deposit?
- What approval is required from shareholders of the buyer and seller for the sale or purchase?
- What insurance policies are in place?
- What representations and warranties have the buyer and seller made to each other?
- What happens if the assets are damaged or destroyed before the closing?
- If there is a dispute, do the parties want to stipulate to arbitration or mediation before going to court?
- Under what circumstances may one party terminate the contract?
- If a dispute arises, what state and county will the court case be filed?
- What is the closing date? What happens if one party cannot close?
Investing in an attorney with experience negotiating Asset Purchase Agreements makes great business sense. Generic forms can increase risks and the cost of litigation that results from overlooking important issues in order to close quickly.
The contents of this blog and website are for informational purposes only and do not constitute legal advice. Use of and access to this blog and website do not create an attorney-client relationship between the user and Iurillo Law Group, P.A.