Buying or selling a small business can be a stressful, complex, and time-consuming process. Here are 6 tips that can make the process go smoother.

  1. Seek professional guidance. A qualified third party, such as an attorney, broker, escrow agent, or someone else who has experience with acquisitions, can provide valuable insights and advice. They can answer questions, help navigate the process, identify red flags, and help create solutions to challenges.
  2. Use a letter of intent or term sheet. Before diving into a purchase agreement, it is usually a good idea to negotiate a non-binding letter of intent or term sheet. The primary purpose of this document is to establish the main business terms of the acquisition, such as the purchase price, payment terms, and the assets and liabilities being transferred. Through this process, the parties may not be able to agree to the terms of the transaction saving a lot of headaches and unnecessary costs.
  3. Have a clear plan in place. Acquisitions can be complicated and take a lot of time, so it is important to have a clear plan in place. This plan can include a list of likely contracts, the responsibilities of the parties involved, and a timeline to follow. One of the most important metrics to define up front is a closing date for the transaction with a commitment by all parties to try to meet this goal.
  4. Communicate effectively and efficiently. The parties should try to stay focused on the end result and not get held up on unimportant details. By working together to complete the tasks at hand, and eliminating unnecessary back and forth, the transaction will usually close faster. Acquisitions are a team effort and collaboration among all the parties involved is key.
  5. Identify potential roadblocks and address them early. There will be challenges as negotiations progress. In some cases, the roadblocks will come from a third party, which can be frustrating. Commonly, this is the landlord responsible for an assignment or new lease agreement. But, issues may also come from a lender, bank, employee, another owner, customer, or any number of other parties. Addressing these issues early can be the difference between a successful or unsuccessful close.
  6. Be reasonable. Remember that the other party is simply trying to get the best deal for themselves. They are not the enemy. By being reasonable and negotiating in good faith, the parties can increase their chances of reaching an agreement that is beneficial to both parties.

Shawn Peddycord is a small business attorney specializing in contracts and acquisitions in North County San Diego. He represents small businesses and entrepreneurs in a variety of asset and equity purchase and sale transactions, and has extensive experience drafting and negotiating commercial contracts. This blog is for informational purposes only, is based on California law, and is not intended as legal advice or as a substitute for legal counsel.

Categories: Acquisitions