Protecting Your Interests Throughout Complex Transactions
Buying a business takes thoughtful preparation. Before considering a purchase, it is important to understand your own goals, financial capacity and business experience.
At AEGIS Law, we have over 25 years of experience in assisting buyers and sellers of businesses in Florida and around the world. Whether you are a buyer looking to purchase your first business or a private or public company seeking to add to an existing portfolio of businesses, it is important to establish realistic goals and parameters. Our attorneys take a practical approach to determine your goals and protect your interests.
Finding The Right Transaction For You
Buying a business is a serious commitment in many ways. We recommend searching for a business you know and can understand. Do your research on the industry, the geographic and demographic reach of the business and the products sold.
It is also critical to understand your financial capacity to acquire the business and operate it for at least two years. Often, we find that new acquisitions take more time and financial resources than expected. If the buyer does not have access to the cash and financial resources required to operate the business through transition to new ownership, the newly acquired company may fail.
The Importance Of Conducting Due Diligence
Buyers need to consider not just whether the business is doing well under current ownership, but how will it transition and perform under new leadership. Due diligence is more than looking at the books and records and tax returns of the seller. It is worth using counsel and a good accountant/CPA.
Will new customer or vendor contracts be required? Will vendor pricing survive? Are there key employees who may or may not stay with the business? Are there non-competition agreements in place with key employees or is there risk they can leave and take customers with them? We will work with you to address these questions and more, depending on your unique situation.
Key Considerations Throughout The Transaction
Prior to and throughout the transaction, there will be a wide array of considerations for you to address and decide on. We can assist you in proactively addressing some of these key items, including:
- Working with the seller to understand why they want to sell
- Talking to vendors and customers or taking steps to understand the company’s reputation
- Understanding when and why you are overpaying, paying a fair value or underpaying
- Understanding which assets you are acquiring and which liabilities will be left behind
- Learning how any intellectual property, trademarks, patents or more are held
- Considering whether real estate is included and any potential related liabilities or liens
- Knowing how you will finance the transaction
Allocation of the purchase price has tax implications for the buyer for years to come. Sellers try to minimize tax impact on sale, often leaving a buyer with a purchase price allocation heavily weighted toward goodwill. This, however, is not good for the buyer because the cost of goodwill is amortized or divided up and taken as a deduction for 15 years.
It is more advantageous to have more of the purchase price allocated to equipment and inventory. The IRS requires a buyer and seller to agree on purchase price allocation and has been clear that the allocation should reflect actual value. Working closely with your accountant and attorney will ensure that the valuation is handled properly.
We recommend that your legal counsel reviews the purchase agreement prior to execution of an offer from the buyer. Once the buyer signs the agreement, it is an obligation of the buyer, even if the buyer can walk away during due diligence. Often the due diligence period is short, waiting until you have completed it to engage counsel essentially means counsel will be late to the deal and will have few tools to assist in structuring the deal to the buyer’s favor.
Learn How We Can Assist With Your Legal Needs
We work with clients on a fixed and phased fee structure to keep costs down from the start. This means we can work with you from initial concept through closing and beyond at a fee that is commensurate with deal size and status. If you deal terminates, our billings cease as well.