Business acquisition agreements or asset purchase agreements
What contracts are involved in purchasing a business?
Although business acquisition agreements differ in details, they all share the same basic structure. The typical agreement may contain the following:
- Terms of the transaction – identification of the assets or stock to be transferred, consideration to be paid, and mechanics of the transaction
- Provisions of the terms – specific conditions placed on the terms of the transaction, such as employment contracts
- Stock provisions – if stock or other securities are used as payment, terms relating to registration
- Representations and warranties of the seller – this includes assurances of good title, profitability, etc.
- Representations and warranties of the purchaser – this includes assurances of prompt payment
- Covenants of the seller – in other words, promises to do or not to do something before closing
- Conditions to the purchaser’s obligation to close – events that must happen for the purchaser to be bound to buy from the seller
- Conditions to the seller’s obligation to close – events that must happen for the seller to be bound to sell to the purchaser
- Closing and termination provisions – these are mostly last minute assurances by seller to comfort the purchaser’s fears
- Indemnification clauses – amount of money that can be claimed if something is wrong with the deal
- Other clauses – these include finders’ fees, expenses, and common trade agreements
Should an attorney review the business acquisition or asset purchase agreement?
Business acquisition agreements have a basic structure, but many provisions may be perplexing. Don’t let yourself be fooled into believing any promises about the acquisition agreement without first having it reviewed by an attorney who can flag risks and explain to you what the risk means. An attorney may also draft a new business acquisition agreement that meets the needs of your situation.