This talk outlines the issues, documents, due diligence, characters, and problems to consider in the course of looking for and negotiating a business purchase.

1. Legal issues in Business Sales
By: William A. Price, Attorney at Law, www.growthlaw.com

2. The Pilgrim’s Purchase
I. Sleep: Are You Called To This?
II. The Palace Beautiful: But There Are Lions. The
Armory
III. The Valley of the Shadow/I will fear no evil
IV. Faithful Or Wanton?
V. Vanity Fair: Money-Love, Hold-the-World,
Save-All
VI. Hopeful and Valiant

3. Are You Called To This?
• Change, or Die: Business Lives By Growth
• Buy or Build? Compare costs, assets and
market position available after each
• Purchase program risks: Loss of
independence, bad
employees/partners/results after mergers,
ROI expectations of capital partners

4. The Palace Beautiful
• Well-Organized Sellers Write A Good
Prospectus: Growth in sales and profits
• They “clear the underbrush” of bad
contracts, minority shareholders, problem
products and people before you see the
deal
• They offer a well-positioned add-on to your
business

5. Lions In The Palace
• The best sellers are your competitors
• Their “underbrush clearing” may have left
liabilities or future lawsuits
• The customers may be tied to the seller,
not the business
• Sellers and staff may not play well with
others
• The numbers, permissions, or paperwork
may be wrong

6. The Armory
Purchase Process Documents To Protect
Buyers And Sellers:
1. Engagement Agreements With Brokers
2. Nondisclosure Agreements With Possible
Sellers
3. Term Sheets To Outline The Deal
4. Agreements Signed At Or Before Closing

7. The Valley of The Shadow
• Most deals break down
• The search and negotiations take much
longer than expected
• Time on these tasks produces no new
business income until you are done
• Careful process helps avoid the
unexpected: distrust and fear kill deals

8. I Will Fear No Evil
1. The brokerage agreement
• Term: how long to find a deal?
• Payments: Retainers, monthly consulting,
and contingent, expenses?
• Noncircumvent: Payment for introductions,
even if deals not done by term
• Exclusive vs Nonexclusive engagements

9. I Will Fear No Evil II
2. Nondisclosure/Noncircumvent With
Prospective Buyers/Sellers
• Protects vs competitive use or disclosure
of information provided, disclosed pty and
agents and employees
• Identify and document information
transfers
• Publicly available information not covered

10. Faithful or Wanton?
Disclosures before and Due Diligence After
Letters of Intent (LOI)/Term Sheets
Deal Room pre-Term Sheet items:
• Proof of ownership
• Three years financials or good projections
• Business plan (Products, markets &
competition, business team, budgets &
profit/activity plans & results/trends)

11. Vanity Fair
LOI/Term Sheet Negotiation: The
Characters
Our Pilgrim: seeks to buy the Truth
Save-All: The broker, lawyer, and bankers,
seek to bring the parties together
Money-Love, or Hold-The-World: The
possible sellers (Greed, or keep what he
has?)

12. Vanity Fair II
Term Sheet Elements
1. No binding contract
2. Stops negotiation with 3d parties for due
diligence period
3. Sets closing date
4. Price and Ownership Terms
5. Closing Date
6. Other Contingencies

13. Vanity Fair III
Price and Ownership Terms
• All cash, or earn-out?
• Stock deal, or asset sale?
• Incentive Payments For Earn-Out
Milestones/Targets

14. Faithful, or Wanton, Again
Due Diligence Period: 60-90 days before closing:
• Verify all dollar, ownership, business
representations, regulatory issues
• Financials and documents easiest
• Employee discussions/negotiations sensitive,
follow show of good faith
• Customer discussions/negotiations most
sensitive, last before closing

15. Faithful or Wanton Checks:
Your Team
• Lawyer to coordinate, check contracts,
contingencies completed, results of other
professional’s work, negotiate final terms
• Accountant/bookkeepers to check all taxes
filed and paid
• Environmental engineers to check site,
process engineers and industry experts to
check equipment/process, appraisers

16. Hopeful and Valiant
• The final agreement: terms, post-sale
warranties, warranty limits, definition of dispute
resolution processes, transfer documents for all
assets
• The accounts at closing/inventory checks
• Pre and Post-Closing Filings (Bulk Sales, IRS
Reports on Allocations)
• Mediation, Arbitration, or Litigation If Necessary

17. Questions?
William A. Price
Attorney at Law
www.growthlaw.com
P.O. Box 1425
Warrenville, IL 60555
Tel/Fax 1-800-630-4780
Email: wprice@growthlaw.com