What should I know about a purchase agreement?

What should I know about a purchase agreement?

On Behalf of | Sep 24, 2015 | Uncategorized |

Understanding a purchase agreement is important when selling your business. Understanding the purchase and sale agreement helps the parties know what to expect, what to negotiate and what expert guidance may be needed.

Prior to a purchase agreement, a number of steps of the purchase process have likely already progressed, including the buyer has decided to acquire the business and both parties have performed due diligence to confirm that they want to, and are able to, proceed with the transaction. What follows is the purchase agreement which involves negotiation concerning price, payment structure and other important aspects of the deal.

Purchase agreements and sales range from tens of thousands of dollars to hundreds of thousands of dollars or more. Because of the different rules and requirements associated with various transactions, it is important to have the appropriate guidance when negotiating and drafting a purchase agreement. In addition, purchase agreements can oftentimes be complex.

There are a number of important considerations that will be included in the terms of a purchase agreement. Among the terms that may be found in a purchase agreement are the names of the parties and business; a list of all assets; a list of inventory; business transfer agreements; a list of all liabilities that will be assumed by the buyer; the price; payment terms; the closing date; seller terms; the seller’s representations and warranties; the buyer’s representations and warranties; seller’s covenants; default provisions; and obligations for fees, among other important considerations.

The purchase of a business can be a big step for both the buyer and the seller. Because of the importance of a purchase agreement, it is helpful for both buyers and sellers to fully understand the elements of a purchase agreement when negotiating and entering into one.

Source: Inc.com, “Understanding a Purchase and Sale Agreement,” Mike Handelsman, Accessed, Sept. 18, 2015