Selling your business may be the most important financial transaction you’ll ever complete.
In addition to finding a buyer and negotiating a sale price, you’ll need legal help along the way. A mergers and acquisitions (M&A) attorney can represent your interests from the time you start the sale process to closing.
The sale process involves complex legal scenarios and issues that make each business sale unique. If you use an M&A attorney, can make a more informed decision about selling your business.
The process starts with finding potential buyers.
Assessing Potential Buyers
Does a potential buyer understand your business, and can they obtain financing?
If you work with an M&A attorney and a business broker, you can get answers to these questions.
Your business may have industry-specific risks and concerns. Some businesses, such as banks and financial institutions, are heavily regulated, and your attorney can protect your interests when you start a conversation with a potential buyer.
If a buyer plans to fund a purchase through a lending institution, your attorney will create and review documents to ensure that the funding source is legitimate, and that the transaction is funded at closing.
A buyer may be interested in an equity purchase involving stock, or the purchase of specific company assets. An experienced M&A attorney understands the potential legal issues for both types of purchases and can review and/or draft stock and asset purchase agreements for the sale.
Your attorney and your business broker can help you evaluating the chances of a successful sale. If you decide to proceed with a buyer, you’ll enter into a due diligence process.
Creating a Smooth Due Diligence Process
Due diligence is the process of providing additional documentation to a buyer. An attorney can protect your interests during this review and manage the document requests from the buyer.
Most of the legal advice an attorney contributes is during the transaction stage, including due diligence and closing.
Your M&A attorney will create confidentiality agreements and a letter of intent, which is used to draft the final documents for the business sale. The letter of intent will outline:
- The assets purchased, such as company stock, inventory, receivables or intellectual property
- The liabilities assumed by the buyer, and those retained by the seller
- Who will pay the accounting, legal and other expenses related to the sale
The M&A attorney can identify potential risks and liabilities related to all of these decisions. Your attorney will work with the buyer’s attorney to address these issues, as well as the legal counsel for any lenders that are involved in the transaction.
At closing, your attorney will review all of the required closing documents, such as asset purchase agreements, or the release of liens on assets. The attorney will also monitor the document delivery schedule to ensure that the closing process stays on track. Finally, the M&A attorney will verify that the buyer pays the dollar amount called for in the closing documents.
Your attorney and your business broker will work together to find a qualified buyer, manage the due diligence process, and sell your business successfully.
Working with the Business Broker
Your business broker operates as a key advisor during the entire business sale process.
Once you decide to sell your enterprise, a business broker can pre-screen potential buyers. Business brokers have extensive connections and know how to market your business to potential candidates.
Selling your business is a time-consuming process, and you want to quickly identify buyers who have the management ability and financial means to make a purchase.
When your broker identifies a buyer, your M&A attorney can provide legal guidance on a potential buyer’s ability to obtain funding. If a buyer is securing financing through a lender, your attorney will review documentation to determine if the lender has committed to financing the transaction.
The attorney will assess the legal side of any potential obstacles to a sale identified by the broker. If the buyer is hesitant to assume company liabilities related to the sale, for example, your attorney can evaluate that issue.
Your business broker negotiates the final sale price on the seller’s behalf, and the attorney will review legal documents in due diligence and during the closing process.
Brokers and attorneys work together on regulations, permits, and licenses related to a sale. Many industries have federal, state and local regulations, and the sale transaction must comply with any regulatory, tax and legal requirements.
If your business includes physical locations, such as retail space, offices, or manufacturing locations, each property must comply with state and local permits and license requirements.
Rely on Your Team
Selling your business requires a team of experts who can guide you through the process. An attorney should be part of that team and will protect your legal interests as you move forward.
By retaining an experienced M&A attorney, you’ll avoid legal complications, find a qualified buyer, and save time during the due diligence process. Your business broker and attorney will work together to help the sale process go smoothly. Rely on your team to successfully close a business sale.