Key Elements of a Purchase Agreement

In selling your business, the purchase agreement outlines the key terms.

It’s important to review it carefully.  

Here are some points to consider when evaluating a purchase agreement:

Check the definitions section to understand what the key terms mean.

Review the price and how payment will be made. 

There may be price adjustments impacting the price such as working capital requirements.

Review the warranties and representations section carefully for what you are representing about your business.

Review the indemnification clause which states what happens if the warranties and representations are not met.

Consider the termination provisions which state what conditions cancel the deal.

Typically, there are fees associated with a breakup.

The closing conditions list the requirements for what must be met to consummate the transaction.

Finally, the covenants section outlines what each party must do during the transaction process.  

Review each of these sections carefully as they impact the completion of the buyout.

 

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