Now it is time to get serious to close the deal. Expeditious action is required before time etches away healthy rapport, feelings of euphoria on all sides and basic understandings of agreements reached. To lose time now is to risk losing a successful transaction. The basic terms have been negotiated by the consultant and a lawyer must be added to the team to codify the agreements. To expedite the process, the owners should hire qualified and experienced transactional merger and acquisition (M&A) attorneys whose only goal is to capture the agreements already reached in proper legal documentation and move the legal process as fast as possible to closing and funding. Up-to-date M&A expertise and experience are vital. The purchase agreement can take many forms, including stock purchase agreement, asset purchase agreement, or merger Agreement. Your consultant will recommend that you, the owner, initiate the first steps and let the company M&A attorney develop the first draft in order to start the process with the most advantageous terms to the seller.
It is not unusual to see 10-20 drafts go back and forth between legal counsels for both sides. IFG principals will continue to facilitate, involved in every iteration and change, to make sure the best interest of our client are served and that harmful clauses or conditions are not inserted. This phase is “war” and IFG is determined to be your General Patton on the battle field between the lawyers. IFG will insist on submission and agreement to the Expected Timetable to Closing, a Disclosure Schedule, and will negotiate items of vital concern to the seller which often include Employment Agreement for the owners, Covenant Not to Compete, Compensation Terms for the owners who stay active in the business, Addition of new Outside Board Members (if any), Owner Incentive Bonus Programs for Exceeding Performance Metrics, Earn Outs and ClawBacks, Escrow Agreements and Hold Backs, Representation and Warranties, Management Fees (if any) to be charged by the buyer if it is a private equity group, Environmental Matters (if any), Walk-Away Provisions, “Baskets” and Covenants, Indemnification, “No-Shop” Provisions, Assumption of Liabilities, Financing Contingencies, Closing Conditions, Payment Terms and many other legal conditions that are vital to the long-term satisfaction of the seller.
While lawyers are expensive, it is our experience that paying for the best available legal counsel at this stage is generally advantageous to the seller. IFG will stay involved in the process as your proxy.
