There are a great number of factors to be considered when buying a business. We have put together a straight-forward document that lays out, step-by-step, how we assist you in finding the right business to purchase.
1. In some transactions, a broker is in a dual agency or limited dual agency relationship with both buyer and seller. In fact, if agreeable to both buyer and seller this can often greatly assist in arriving at a swift and mutually satisfactory transaction. To better understand a dual agency relationship please ask us for more information. In other transactions, a buyer broker represents the buyer and the listing broker represents the seller.
2. You will be required to sign a Confidentiality or Non Disclosure Agreement.
- This helps us to ensure the confidentiality aspect of buying and selling a business
- We will request an initial meeting in order to detail the specifics of your buying or selling criteria.
- You will be asked some basic questions about yourself so that we can develop an acurate profile of your goals and expectations - this will include an assessment of your ability to finance and operate the type of business you have in mind.
- We will then review businesses that match your criteria, each presented with a Confiddential Business Profile (CBP) that contains key decision-making information from market and industry data to the gross margins and other financial information.
3. After your assessment and decision to proceed, a meeting is arranged to view the business and to meet the Seller with your questions. Typically, this is a discrete visit, arranged after hours, to preserve the confidentially that the business is for sale.
4. If you are satisfied with the results of this meeting, and interest is still high, you are at a point where we can assist you in prepaqring an offer or to request further information.
- At this time, any reasonale request for additional information will be honoured, however, due to confidentiality issues, some information may not be released until after your offer has been presented and accepted. We will be in a position to best determin the conditions of honouring your information request.
- One needs to realize that an offer is just that, an offer, and is typically subject to many contingencies. A seller therefore, may restrict some of the information they are willing to provide to you until such time as they determine the seriousness of your interest.
5. Your offer, when prepared by us will adhere to our standard format that provides for your protection throughout the offer process. We will also know what is likely to be agreed upon by the Seller thereby avoiding much back and forth. However you should expect some typical negotiations in the process.
- Such offer is typically a conditional offer or in the form of a Letter of Intent. It will also contain specific requirement by the Seller as far as training and transition and non-competition clauses.
- A reasonable deposit based on the purchase price also typically will accompany the offer. This deposit will be made to our trust account, similar to the purchase of real estate, a cheque to your lawyers trust account.
- This amount is often increased after subjects and/or contingencies are removed. The offer typically would also contain other contigencies such as a due diligence period, deadlines and a closing date.
- The due diligence period allows you and your broker the opportunity to verify and review all the information given to you including that which may have been withheld prior to your offer.
6. Upon removal of all subjects and conditions the offer now becomes firm and binding.
- At this time, often the deposit is increased as noted earlier. Naturally these deposit amounts are fully applied against the purchase price.
- The details of your accepted offer or letter of intent is now forwarded to the lawyers for both parties for drafting and review of the Definitive Agreement.
- The definitive agreement is the actual agreement of purchase and sale and typically included all of the conditions and clauses in the original order or LOI as well as the intent and, possibly other clauses typical of that type of purchase and sale agreement.
- This agreement is typically drafted by the Buyers lawyer and typically costs around 2% of the purchase price. This may vary substantially based on your lawyer, location, business, extent of back and forth between lawyers, negotiations etc.
- Buyer and seller are typically responsible for their own respective legal costs.
7. We will work with both lawyers and any professional advisors who may become involved to ensure that all details concerning various forms, applications, directions, assurances, releases, assignments, instruments etc are detailed to your satisfaction. It is important that you identify this to your advisors and lawyers so that they know that your broker will be responsible for managing the transaction to a successful close.
8. Once the definitive agreement has been accepted by both legal councils and agreed to by you and the Seller, all parties are ready for the closing
- During this time any other agreements such as non-compete agreement, training and transitions, lease of sale of premises (if applicable), vendor notes, security agreements etc. are also executed.
10. Often there can be an adjustment period that is specified in the Definitive Agreement where some of the funds will be held in trust pending final invoices being settled and other similar adjustments.
11. If the seller has agreed to provide proper training, We will monitor the progress of this process to ensure your satisfaction with the agreement.
Copyright 2008