Buying a business can be a complex process, but there are a number of documents that can be used to guide your purchase to ensure your financial and legal position is secure.
No doubt you’ll find yourself surrounded by a mountain of paperwork, but when you know exactly what documents you require, navigating the administrative processes of a business acquisition can be made easy on yourself.
The following guide contains details of the main financial and legal documents you will need when buying your new business.
Confidentiality AgreementNo matter how certain you or your seller may be about the intentions of the other party, the transfer of a business is an incredibly sensitive process. Finances, assets, debts – all aspects of both parties will be scrutinised. It’s also possible the seller will want to avoid worrying their staff or clients by allowing news of a potential sale to leak early on in the process. Before signing this agreement, however, ensure you seek legal advice to make sure your obligations as set out in the contract are reasonable.
Heads of TermsHeads of Terms documents include:
Exclusivity AgreementA document that is very important to you as the buyer, the exclusivity agreement allows you a specified period of time to negotiate the sale with the current owner whilst preventing them from actively seeking another buyer or negotiating with another party. This document can be created in its own right or presented as part of the Heads of Terms, but either way it should be signed as soon as possible to ensure you are not forced to battle with another party during the buying process.
Due Diligence QuestionnaireDue diligence is an important process that ensures no problems or liabilities are overlooked ahead of the purchase taking place. As the buyer, this particular process is mainly for your benefit, although it’s important that both parties are aware of what it entails.
Acquisition AgreementThe acquisition agreement is a key legal document that will define the agreed terms of the purchase and set out the exact details of the sale, including price and time frame. There will also be a number of documents included within it that are designed to protect you, the buyer, both now and after the transaction has taken place. These documents may include warranties (confirmation of contractual promises), indemnities (details of compensation offered should certain liabilities arise) and covenants (preventing the seller from setting up a competing business or stealing clients). The acquisition agreement will differ depending on the type of purchase you are making:
Disclosure LetterThe disclosure letter will address many of the areas above and lay out the specific disclosures that the seller is making ahead of the sale. Any issues or problems raised in this letter will be considered disclosed ahead of the purchase, and as such you will be unable to make a warranty or indemnity claim on anything stated within. However, if you address these issues before the sale is completed you could use them as a trigger for the renegotiation of price.
Completion DocumentsIf you’re purchasing a company via the method of asset purchase, you will need to ensure a number of practical steps are taken, such as sorting VAT, payroll and national insurance. A document known as a Completion Agenda will ensure these are all ticked off.
The practice has been around for over two decades with virtually zero DB transfer exposure and a focus on financial planning. The Practice represents one of the cleanest Businesses you’re likely to see anywhere on the marketplace at this time. Number...
This well-established manufacturer for sale has been trading for over 185 years and has built up a considerable niche business for agricultural and engineering products for a cross-section of industry sectors. The business to be sold is ideal for acq...
Highly Profitable Wealth Management Firm. Great Staff Base Who Will Remain and Continue to Manage the Clients. Established: 25 to 30 years. Number of staff: 5 to 10. Offers invited.
Sign up to receive our acquisition alert emails to get your FREE guide
Business Sale Report is your complete solution to finding great acquisition opportunities.
Join today to receive:
All this and much more, including the latest M&A news and exclusive resources