Structuring a Business Purchase Agreement

Attention to detail is needed to ensure a fair, thorough and smooth transaction
By Paula Andruss, Freelance writer Whether you're buying or selling a business, it's critical that every commercial element of that company is accounted for in the purchase agreement. Fitting it all into a single document is a real challenge, and taking the time to get it right on paper will help make the deal a successful venture for both parties long after the ink has dried.

The basics of setting up a purchase agreement boil down to three phases:

1. Conduct a thorough business review or due diligence program to identify the essential points of sale.
2. Draft a comprehensive document that includes those points, as well as other protective measures.
3. Have it reviewed by your legal counsel before signing anything.

 

Define key terms

Specifically outline the details of the purchase, including naming assets and liabilities, conditions of the sale, transitioning of the premises and employees, and how to collect outstanding accounts after the sale closes.
Try: Find common business purchase terms and conditions in a sample contract at Lectlaw.com.

Determine a fair-market value

Be realistic when establishing the price you are willing to pay or accept. Overpricing on the part of the seller, or a lowball offer from the buyer, will create ill will and set a contentious tone for the ensuing negotiations. An equitable price at the outset benefits both parties.
Try: BizPricer and MBAWare offer business valuation software and services to help determine a company's market value.

Protect your assets

If you're selling a business, include a confidentiality agreement so prospective buyers can't use or divulge sensitive information — such as financial data and client lists — that they examine while considering the purchase. If you're the buyer, incorporate a non-compete clause that says the seller may not engage in the same type of business or in the same market for a pre-determined amount of time.
Try: Order attorney-drafted non-disclosure agreements at Urgent Business Forms.com.

Enlist a professional

Even if you want to draw up the papers yourself, have an attorney look them over before finalizing the deal. It may cost a couple hundred dollars for the consultation, but it could save thousands — and several headaches — after the sale is complete.
Try: Find an attorney in your area who specializes in buying or selling a business at Lawyers.com.

• Study business terms so you understand the meaning and implications of each section of the agreement.
• If something in the contract seems vague, get the language clarified before you sign it.
• Allow each party adequate time to evaluate the document - and any changes to it - during the negotiation.
• Keep a written log of all communications between the buyer and the seller during the process.
• Think about what could go wrong after the sale and include contingency clauses for those scenarios.