While many entrepreneurs choose to start their own businesses, others prefer to acquire an existing business. Acquiring an existing business can also be a good path for established businesses to expand. Regardless of which scenario you are looking at, the Los Angeles mergers and acquisitions lawyers at SLG can represent you through each stage of the process.
Business acquisition is a fairly complex legal process. It is not something you should enter into lightly or attempt without experienced legal counsel.
Here is just a brief overview of the acquisition process and some key considerations for you as a potential buyer:
- Determining the Type of Sale
The first thing the buyer and seller need to agree upon is whether to structure the acquisition as an actual sale of the business entity or simply a sale of certain business assets. As the buyer, an asset sale is generally preferred, because you can decide what parts of the seller’s business you actually want to acquire. The seller, in contrast, often favors a sale of the entire business entity outright as it means unloading not just assets but liabilities. Tax considerations can also play a big role in deciding which route to take.
- Valuing the business.
Determining the value of the business and how much you are willing to pay for it is perhaps the most important part of the business acquisition process. As the buyer, the best practice is to obtain an outside expert valuation of the business you plan to acquire. The seller will likely obtain their own valuation. Keep in mind, however, that these valuations do not represent a final purchase price. They are simply tools to use as part of the negotiation process.
- Negotiating the terms of purchase.
In addition to settling on a final purchase price, you also need to determine how you will actually finance the acquisition. Business acquisitions are often not a “cash upfront” transaction. In many cases, the seller will help finance the acquisition by agreeing to receive the purchase price over a period of time, allowing the buyer to raise the money to buy the business by running the business.
- Performing due diligence.
As a potential buyer, you will want to complete a thorough review of the seller’s business, and you have the right to ask for a wide range of financial documents and other materials to help you do so. This includes not just financial statements but also lists of assets, intellectual property, and key contracts. You should also obtain documentation regarding any potential legal issues affecting the seller’s business, such as civil judgments, liens, and information on any pending lawsuits or regulatory proceedings.
- Closing the deal.
Once you have negotiated a purchase agreement, obtained financing, and performed your due diligence, you can move forward with closing the acquisition. This typically involved signing the final purchase agreement and completing the necessary steps to transfer legal ownership of the acquired business entity and/or assets.
Our Los Angeles Mergers & Acquisitions Lawyers Can Help Make Your Deal a Success
Even under the best of circumstances, acquiring another business involves a lot of legal paperwork. And if something does go wrong during the process, an experienced Los Angeles M&A attorney can advise you on what steps to take next. Call Structure Law Group, LLP today at (310) 818-7500 or contact us online to schedule a consultation.