Now that you most likely have tons of paperwork, take the time to go through it carefully and begin writing down questions on financials or any other documents that give you pause. Failure to do this means you aren’t performing due diligence and can come back to bite you later—it’s up to you, the purchaser to indulge in due diligence.
Next, utilize these tips for pre-negotiation planning for business acquisitions:
Initial Meeting – Here, you will most likely go through your checklist of questions (and get answers or supporting materials) and also gain insight on the purchase price desired by the seller. Don’t agree to any price—this is a get to know the business better time.
Follow-Up – If you did receive answers to questions or supporting documents requested, you will need a follow-up meeting to discuss discrepancies or obtain accuracy of documents—you may even have more questions for the seller. These types of meetings can usually be done via a phone call.
Contracts – Never, ever, ever allow the seller to prepare a contract. In addition, never agree to use the same attorney to draw up a contract for the acquisition of the business. If the seller wants his or her lawyer to create a buy/sell agreement, that’s fine, but don’t sign it until you’ve had your attorneys take a look at the buy/sell agreement. Expect your attorney to offer up things that are either undesirable in the buy/sell, clauses or compromises, which you’ll take into pre-negotiations.
Contract Meeting – You can have both attorneys argue out stipulations to the contract, but it is best if both the buyer and seller are present. Here is where pre-negotiations are very important as you will have to accept or offer up compromises—or items you want inserted, changed or deleted. For example, if you don’t want to retain any of the current employees (or employee obligations), that should become part of the buy/sell agreement. Prior to this meeting you and your attorney should pose what if scenarios to each other and see if the buy/sell agreement provides solutions to those scenarios—and solutions that will hold up in court if any disputes arise.
Final Run Through – Once the buy/sell is approved by your attorney, have the closing at the place of the business you are acquiring. Why? It’s important that before you sign, a final walk-through is performed to ensure the existing owner hasn’t darted away with any promised assets. If they have, getting them back after the contract is signed is very hard to do. Make sure the buy/sell includes a mediation and arbitration clause for settling disputes.