We’ve heard about the role of corporate lawyers in London in helping purchase a business. For your part, acquiring a business is one the more crucial decisions you can make, especially when you are looking to grow your company. It may appear challenging, but if you are well aware of the guidelines in business purchasing, and have the right assistance, you may be able to carry out this process seamlessly.
Doing Prior Research
Prior to buying a business, you must conduct a background check on the company. Some details you have to consider are the company’s financial statements, their customers and suppliers, their employees, and other assets.
When you decide to acquire this information, the seller would ask you to sign a non-disclosure agreement. This is to make sure that you need the information only when buying the business. Apart from going over the content given to you, you also have to go through government records on the business to double check on the information.
You then need to decide on the price. If you have little knowledge about the deal you want to offer, you could turn to an appraiser or investment banker to help you in determining the value. You can then present an offer to the seller, while taking into consideration your liquidity and tolerance for risk.
Determining the Structure for Purchase
Once you have all of these fixed, it’s now time for you to buy a business. There are many ways to go about it, but the main type includes mergers and acquisitions. While mergers and acquisitions virtually mean the same things, there are few nuances between these purchase methods:
- Merger is often used to describe companies of equal size coming together to form one company. Here, the company’s stocks are given up, issuing new types of stock.
- Acquisition is used when a company takes over another company and becomes the new owner. The target company then ceases to exist, and its stocks are no longer trader. The buyer company, meanwhile, takes over the business with its stock continues to be traded.
Preparing the Legal Documents
Once it is all clear to you, you can then proceed to complete your purchase of the business. To do that, you also need to prepare essential legal documents.
- Letter of Intent (LOI)
This is a non-binding agreement which lists the main point of the transaction. Having an LOI will prevent misunderstandings between the two parties prior to the sale date. An LOI typically includes the purchase price, the details of the deal structure, the parties’ expectations regarding the purchase agreement, and the timing of the closing, among others.
- Purchase Agreement
This is the main legal document, covering everything related to the purchase. It expounds on the LOI, stating the details the buyer and seller are agreeing to, and outlines the situations if things do not work out in the purchase. For the purchase agreement, it is up to the buyer to prepare its draft. This is mainly because they are the one in charge of the cash, and face the biggest risk for the loss. To make a good purchase agreement, you need the help of a corporate lawyer to draft it.
Help throughout the Process
You’re now all set for your purchase! Now it’s up to you to find the last piece of the puzzle: the law firm that will guide you throughout the purchasing process.
To make sure your merger or acquisition goes along smoothly, you need to look for a legal partner to guide you through the most critical stages of the process. Once you find an experienced and seasoned corporate law firm, you will be able to make a smooth and worry-free purchase of a business.