Business Sales, Mergers & Acquisitions
Business sales, mergers, and acquisitions must be handled appropriately, with due diligence and careful attention to the legal consequences of various choices that must be made in the course of complex transactions that have many moving parts. If you are concerned about purchasing or selling a business, you should call an experienced Pleasanton business attorney at the Law Offices of Stephen M. Fuerch. We handle mergers, sales, and acquisitions involving small and medium-sized businesses in Alameda and Contra Costa Counties.Business Sales, Mergers, and Acquisitions
There are different types of business sales under California law. A buyer and a seller may agree to an asset sale or a stock purchase, also known as an entity sale. An asset sale allows buyers to acquire certain assets, while leaving other liabilities behind. In general, stock purchases are more straightforward, and therefore they are preferred by sellers, but buyers will need to assume the company’s liabilities.
The seller of a company should make sure that all the aspects of the business are documented before it is sold. Thorough documentation should be in place for agreements with distributors, clients, customers, vendors, and others. A seller may also need to obtain a valuation report created by a business appraiser, accountant, or broker to substantiate the asking price.
Buyers will need to conduct due diligence to make determinations about whether to purchase and which type of purchase would be appropriate. A buyer may need to obtain an independent valuation of the business to make sure that the asking price is justified. Additionally, the buyer should inspect every aspect of the business being sold, including the company books, facilities, equipment, employment relationships, ongoing business relationships, inventory, financial records, accounts receivable reports, and internal and external agreements.
As part of due diligence, the buyer may need to contact the seller’s vendors, customers, and distributors to make sure that these relationships are stable and suitable for the buyer’s needs.Negotiating a Sale Agreement
A business owner who wishes to sell a company may need to prepare a selling memorandum for potential buyers with the help of a lawyer. The document should specify the purchase price, the financial condition of the company, and the goods or services that the company provides. It can be important to have potential buyers sign a confidentiality agreement before they take a look at selling memoranda.
Once the parties have agreed to terms, the buyer may sign a letter of intent. This outlines the principal transaction terms, such as the law governing the transaction, expenses, exclusivity, and confidentiality. The letter may be styled as non-binding, such that it should not be enforced against the parties. However, there may be obligations within a letter of intent that bind the parties under California law. For instance, a non-binding letter of intent may place a duty on the parties to negotiate in good faith to reach a more certain agreement; in that case, a party might be able to sue the other party for failing to use good faith in negotiations.
Once specific terms are agreed by the buyer and the seller, it is critical to memorialize these terms in a written purchase agreement. The agreement will be binding on the parties; it is critical to seek legal counsel by this stage. The purchase agreement should identify the buyer and the seller of the business, the type of sale, the purchase price, the closing date, representations and warranties of both parties, any actions that should be taken, contingencies, future covenants regarding confidentiality and non-disclosure, and provisions related to financing.
Other important documents may also need to be drafted by a seasoned attorney, depending on the business structure and the particular circumstances.Retain a Business Lawyer in Pleasanton
Business sales, mergers, and acquisitions should be handled with representation from seasoned legal counsel. Decisions made during the sales process can have a big impact on buyers. A seller likely needs to seek protection for the investments that they have made thus far in the company. If you need a knowledgeable Pleasanton attorney during this process, you should contact our office. Call the Law Offices of Stephen M. Fuerch at (925) 463-2575 or complete our online form.