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Page 21
How To Investigate Any Business Opportunity
ment and is sometimes a separate exhibit to the purchase and sale agreement.
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Allocation of the purchase price.
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Restrictions on how the business is to be operated until settlement.
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A date for settlement.
The purchase and sale agreement is a complex document and it is a good idea to get professional help
in its drafting.
Evaluating the Offer
The seller should look for all the same provisions in an offer that were enumerated in the section on
making the offer. The types of offers a seller is likely to receive depend in some measure on the size of
the business. A seller should ask for a resume and financial statement from an individual buyer and an
annual report if the buyer is another company. Find out what attributes the buyer brings. Sometimes, a
buyer with a commitment to the work ethic is all that is needed. In other cases, successful related work
experience may be important. If the acquirer is another company, look for the logic behind the acquisi-
tion. Perhaps some kind of synergy or an economy of scale is created. A buyer should prepare and
show the seller a post-acquisition business plan.
One final note - carefully study offers to determine what assets and liabilities are being purchased. An
offer for the assets of a business may be worth considerably less than an offer for its stock even though
the price offered for the assets is higher.
11. Closing the Transaction
Meeting Conditions of Sale
After buyer and seller have entered into a binding contract, there may be several conditions to be met
before the sale may be closed. Such conditions often address issues like assignment of the lease, verifi-
cation of financial statements, transfer of licenses, or obtaining financing. There is usually a date set for
meeting the conditions of sale. If a condition is not met within the specified time frame, the agreement is
invalidated.
Types of Settlements
Business settlements or closings, as they are also called, are usually done in one of two ways.
1. An attorney performs settlement. In this procedure, the attorney for the buyer, or an independent
attorney acting on behalf of both buyer and seller, draws up the necessary documents for settlement.