The Process of Buying or Selling a Business

People frequently come to me with deals containing terms and conditions that they’ve already negotiated (and often have committed to a signed Letter of Intent (“LOI”)). They ask me to prepare an agreement incorporating those terms and conditions and to help manage the transaction. That’s fine and I can certainly help, but I’m typically left wondering why the client didn’t include certain terms and/or conditions that I think should be included. I tell the client about those terms and conditions and, if they choose to accept my advice to seek those terms and conditions, the client has to re-approach the counterpart for a renegotiation of some important points. Obviously, that’s not a good look for the client and can fray the relationship with that counterparty so it would be best to get those terms and conditions on the table from the outset.

For example, if you’re buying a service-based business then how do you protect yourself against a mass exodus of customers and/or clients after the acquisition closes? An experienced lawyer will tell you exactly how to protect yourself from that, and will know how the agreement must be written in order to provide you with that protection. That’s a very important issue and it’s something that should be presented to the counterparty from the beginning.

In a perfect world, you’d hire an experienced attorney before you prepare an LOI. That way, you’re assured that (1) your LOI is in appropriate form with appropriate language; and (2) you have a chance to at least discuss with the attorney what terms and conditions should be included in the deal. Further, should a buyer be allowed to look at the target’s confidential information (such as financials, customer lists, etc.) prior to the LOI being entered into? Or should it happen after the LOI? An experienced lawyer will help you through these questions and will be able to ensure an appropriate Nondisclosure Agreement (“NDA”) is prepared and executed.

Greg Borman is an attorney in San Diego, California. He practices corporate law, business transactions, and estate planning. He can be reached at greg@bormanlaw.com and at (858) 232-7100.

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