For a buyer, the up front investigation of a business may seem rather simple but what then?  What if I want to buy the business.

First, gather round you professionals, an attorney to review documents and a CPA to assist with assessing the organization.

In my practice and many main street business-for-sale transactions using an intermediary/broker, the process often includes these steps and features.  These are typical but, then, no transaction is typical.
The broker/intermediary, using a neutral, attorney-written offer-for-sale template, incorporates the terms and conditions the buyer would like to include in their offer.   (1)
In a typical asset sale these items are included:

All furniture, fixtures, equipment, leases, goodwill, inventory, contract rights, trademarks, telephone numbers, Yellow Pages ads, email addresses, name and trade names and derivatives thereof, internet domain registration and web site (to the extent of Seller’s ownership interest,) customer and vendor lists, and all other tangible and intangible assets, not including any accounts receivable

In the offer, the buyer is say “I would like to do this, at this price, with these terms but need to know that if certain items are not fulfilled to my satisfaction, I do not have to complete the purchase and will get escrowed funds back.”  These are typical contingencies:

  • negotiation/assignment of lease
  • financing,
  • approval by franchisor,
  • review of documentation and assets

Other typical inclusions are

Sellers warranties, training, appointment of an escrow agent and closing attorney (one person,) negotiation of expense sharing, count of inventory, Uniform Commercial Code (UCC) searches (found for NM here) and tax filings, assignment of contracts, non-compete, allocation of purchase price, closing date, indemnification (bilateral), price and terms (perhaps owner financing.)  If owner financing is requested, the buyer will attach to the offer a personal profile demonstrating capability to operate the business, a net worth statement and credit score demonstrating financial capability and experience.  Recently with the increased interest of residents of other countries wanting to move to the US, without the professional requirements of doctor, nurse, engineer, more frequently securing a visa is a contingency.

The timing of various inspections, lease, financing, etc are designed to move the process forward deliberately with an order of ‘doing’ that makes sense.  The broker/intermediary can to assist the buyer.  The seller also has requirements to provide information necessary, engage with the landlord, etc.  Each requirement is typically assigned a date certain to be competed.

In my work, most often, a neutral attorney is utilized for drafting documents – with expense shared 50/50 between parties.  (The typical expense per side is $850 plus, in NM Gross Receipts Tax.  Once all the tasks are completed and both parties are prepared to move forward to close, they sign off to the neutral attorney, committing to their share of the fees and commitment to use their own attorney for review of documents.

From mutually agreed offer to close can be as little two weeks and up to many months, perhaps a year.  The broker/intermediary, in cooperation with the buyer and seller, moves the process along.  The dates certain for each requirement are intended to keep the process moving and assure getting to close in an expeditious fashion.  If it is not possible to get to close, both parties are better off knowing in a timely fashion.

(1) Note:  sometimes a letter of intent (LOI) is used, as a preliminary step, instead of an offer.  I personally don’t care for LOI’s as they are usually more open, less defining of the expected transaction and more steps for all parties.  Why waste the time?  Know it is an option.