Preparing Your Company Before It Goes to Market
Preparation should begin before confidential information is shared or a letter of intent is signed. Incomplete records or unresolved legal issues can slow the buyer’s review, weaken the seller’s negotiating position, or cause the buyer to withdraw.
Our business sale attorneys can review the company from a potential buyer’s perspective. This process may reveal missing ownership records, undocumented equity transfers, liens, incomplete intellectual property assignments, or licenses that require approval.
A pre-sale legal review may include the following:
- Reviewing formation documents, bylaws, operating agreements, and ownership records
- Confirming the approvals required from directors, managers, shareholders, or members
- Organizing material customer, vendor, financing, licensing, and real estate agreements
- Identifying assignment restrictions and change-of-control provisions
- Verifying the company’s ownership of equipment, software, trademarks, and other assets
- Evaluating pending claims, employment concerns, tax matters, and regulatory obligations
- Addressing liens, personal guaranties, and third-party rights affecting the transaction
- Establishing procedures for protecting confidential information during negotiations
Understanding these matters in advance allows the seller and legal team to prepare accurate disclosures, develop solutions, and avoid surprises during due diligence.
Choosing the Right Business Sale Structure
The structure of a business sale determines what the buyer acquires, which liabilities may transfer, what consents are required, and how the transaction is documented. Two common structures are asset and equity sales.
In an asset sale, the buyer purchases specified property and may assume selected liabilities. The parties define which transfers and which remain with the seller. Separate assignments or other transfer documents may also be required.
For equity sales, the buyer acquires shares, membership interests, or other ownership interests. The entity generally retains its assets and obligations, so buyers often review historical liabilities and seek detailed contractual protections.
Taxes, contracts, licenses, financing, liabilities, and the buyer’s objectives can influence the preferred structure. We work with sellers and their tax and financial advisors before essential terms become difficult to change.
Letters of Intent and Preliminary Agreements
A letter of intent usually outlines the proposed price, structure, payment method, due diligence period, exclusivity obligations, and closing timeline. Although many provisions may be nonbinding, confidentiality, exclusivity, access, expenses, and governing-law terms may create enforceable duties.
Sellers should obtain legal review before signing. An overly broad exclusivity clause may prevent the owner from pursuing another offer while a buyer delays diligence or financing. An unclear price formula may also lead to later disputes over cash, debt, inventory, working capital, transaction expenses, or other adjustments.
Our attorneys help sellers determine whether preliminary terms reflect the proposed transaction and preserve enough negotiating flexibility. Early review reduces the risk of unexpected economic terms in the definitive agreement.
Meet our business sale attorneys
Managing Buyer Due Diligence
During sell-side due diligence, a buyer may investigate nearly every legal and operational aspect of the company. The seller must respond accurately while protecting sensitive records and maintaining an organized process.
The buyer’s requests may address the following:
- Corporate organization, capitalization, and governance
- Financial statements, tax records, debt, and liens
- Customer, vendor, supplier, and distribution agreements
- Employees, independent contractors, benefits, and workplace claims
- Intellectual property, software, cybersecurity, and data practices
- Owned and leased real estate, equipment, and inventory
- Insurance policies, pending disputes, and regulatory compliance
- Environmental, licensing, and industry-specific obligations
DiFalco & Fernandez helps sellers establish a checklist, organize the legal review, track requests, and protect privileged or commercially sensitive information. Diligence responses may shape the disclosure schedules and risk-allocation provisions in the final agreement.
A diligence concern does not always end the sale. The parties may address it through corrective action, disclosure, consent, a price adjustment, an escrow, a limited indemnity, or a closing condition.
Negotiating the Business Purchase Agreement
The purchase agreement defines what transfers, how the seller will be paid, what must occur before closing, and the parties’ remedies for nonperformance.
Our business sale attorneys may draft or negotiate provisions involving:
- The purchase price, deposits, and payment schedule
- Working capital, debt, cash, inventory, and transaction expense adjustments
- Earnouts, holdbacks, escrows, and seller financing
- Representations, warranties, covenants, and disclosure schedules
- Materiality standards and knowledge qualifiers
- Pre-closing operating requirements and access rights
- Conditions to closing and termination rights
- Indemnification procedures, caps, baskets, and survival periods
- Transition assistance and restrictive covenants
- Dispute resolution, governing law, and venue
These terms operate together to allocate value and risk. A higher price may offer limited benefit if much of it depends on performance targets controlled by the buyer. Seller financing can likewise leave the former owner dependent on the buyer’s future performance.
Our attorneys explain the proposed language, identify provisions requiring stronger protection, propose revisions, and assist with negotiations.
Learn more about how we handle corporate matters
Addressing Contracts, Employees, Property, and Intellectual Property
A sale often requires more than one agreement. Contracts may need to be assigned, landlords may need to approve lease transfers, lenders may need to release liens, and licensors may need to consent to new ownership.
The parties may also determine which workers will remain, how accrued compensation or benefits will be handled, and whether retention or transition agreements are necessary. Intellectual property records should confirm the company’s ownership of the rights the buyer expects to acquire.
Through our commercial law and corporate services, DiFalco & Fernandez coordinates related contracts, approvals, governance documents, and transfer instruments to help prevent closing delays.
Learn more about our commercial law services
Protecting Payment and Limiting Post-Closing Exposure
Earnouts, installment payments, seller notes, escrows, working-capital adjustments, and indemnification claims can affect when the seller receives the full value of the transaction.
When payment depends on post-closing performance, the agreement should define accounting principles, performance measures, reporting duties, operational restrictions, access rights, and dispute procedures. Objective standards can reduce disagreements over earnout or adjustment calculations.
Negotiations may also address survival periods, claim thresholds, liability caps, exclusions, control of third-party claims, and escrow releases. These protections can establish reasonable limits on post-closing exposure.
Closing the Sale and Completing the Transition
Before closing, the parties must complete all required approvals, consents, releases, and transfer documents. Our attorneys help manage the checklist, signatures, funds flow, document delivery, and remaining conditions.
Post-closing responsibilities may include customer introductions, transition services, purchase-price adjustments, escrow claims, tax support, or restrictive covenants. The closing record should identify which duties remain and how long they continue.
We remain available to help sellers interpret, administer, and enforce the transaction documents, especially when payment depends on events occurring after the buyer assumes control.
Have questions about closing sales? Contact us
