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Breaking Down the Most Common Components of an M&A Purchase Agreement

Maryn Williams • Jan 08, 2020
Common Components Of An M&A Purchase Agreement
When thinking about standard components of an M&A purchase agreement, it is best to start from the beginning. Since making the move on either side of an M&A agreement is a serious step, everything needs to be organized and clear if the transaction is to proceed smoothly.

Each M&A process is different. Every stage of the process will significantly depend on the two specific parties involved. If you are planning on selling your business in the near future, then it is imperative that you keep each of the most salient features of an M&A agreement in mind.

Let’s go through some of the things you need to include or expect in an M&A purchase agreement.

The Most Common Components Of An M&A Purchase Agreement

Definitions

While definitions might seem like a trivial yet necessary step, taking the time to carefully consider the definitions early on will save you headaches down the road. Depending on the background or position of the person reading the document, words can take on very different meanings. Make sure that all definitions are clear and agreed upon before signing anything!

Implementation Provisions

Of particular concern to the seller of a business, and one of the essential and most common components of an M&A purchase agreement is the implementation provisions. These refer to how the purchase is going to work and what the purchase price will be. Making sure that these conditions are to your liking and completed fairly is imperative before moving forward. Brush up on your negotiation skills to ensure that your interests are protected.

Verifications

As a seller, you need to be prepared to verify that the details you have provided about your business are accurate and complete. It is not only essential to be transparent about your assets and liabilities but also about the current condition of your books. Be sure to accurately reflect employee payroll and benefits, as well as taxes.

At this stage, you also need to sort out which party will be liable for various aspects of the business after the sale is completed and papers signed.

Closing Conditions

One of the final common components of an M&A purchase agreement is a detailed overview of what will happen after the signing of the document and the final sale date. During this time, your business must run smoothly to avoid any problems with the purchase.

If you have negotiated an agreement that is to your liking, then make sure that there is a penalty structure in place to discourage the buyer from backing out of the deal after the purchase agreement has been signed.

Moving Forward

Deciding to sell or restructure your business is a big decision. With this overview of the standard components of an M&A purchase agreement, you now have the knowledge you need to put your plans into action.Moving forward, consulting with our team at Tenn Business Brokers and let us help you to ensure that the deal goes smoothly and fairly.
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