Buying a Business
This is a guide for purchasing a business
Identify the business you want to purchaseDuring the first phase you may need to consult with a business broker to identify the business that you want to purchase. You should also inform your attorney and your accountant that you are looking to purchase a business, so that they can be sure to set some time aside for you.
You may want to purchase a business as an investment. It could be a strategic acquisition for technology or people. It could be some other reason. Nevertheless, be sure to have your professionals ready.
Execute a MOU and NDAWhen you identify the business you want to buy, be sure to execute a memorandum of understanding and non-disclosure agreement so that you can investigate the business. The MOU will lay out the basics of the purchase and the non-disclosure agreement will give the seller comfort that he/she can provide you with information without fear of you using it without buying the business.
Have your attorney look these items over so that he/she can help you understand them and make sure you are adequately protected
Conduct Due DiligenceYou need to investigate the business to ensure that you are getting value for the purchase price. Accordingly, you will need Investigate the revenues, expenses, assets, vendor agreements, customer agreements, employee relations and lease obligations.
Due diligence is the most important part of purchasing a business. Even more important than the drafting of the purchase contract
Execute the Purchase ContractOnce you are satisfied with the due diligence process, you can now execute a purchase agreement that reflects the appropriate purchase price. During this phase, you will need to determine if it will be a stock purchase or an asset purchase.
In drafting the purchase contract, you will need to ensure that you have appropriate indemnity requirements for the seller to protect your interests.
Close the SaleOnce the purchase agreement is executed, you may have an escrow period to effectuate the transfer of assets. When the escrow period is over, you can close the sale and take over the business