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The Four Stages of Buying a San Diego Business
There are many methods of finding a business – brokers, word-of-mouth, various advertising/listings in industry journals/magazines, Craig’s List. If you find a business that interests you, as with any purchase, do your research. Once you have located the business that you want, in general, there are four stages for consummating the purchase of a San Diego business. From this point forward, it is important to have an excellent and experienced San Diego corporate attorney to help.
Buying a San Diego Business: Negotiating the Deal and a Letter of Intent
Depending on the deal, this stage can be straightforward. If the business is listed for sale, you put in an offer. This is similar to putting in an offer when you want to buy a house. Matters are more complicated if you are initiating discussions about buying a business without the target considering itself to be “for sale.” Either way, often a Letter of Intent is signed — although business brokers use form sales contracts in a manner similar to real estate brokers.
The key part of this stage is to agree on what is being purchased — the whole business or part of it — and to agree on a purchase price.
Buying a San Diego Business: Finalizing a Purchase Agreement
Sometimes the Letter of Intent is the purchase/sales agreement. But more often, the Letter of Intent is a short “road map” for the lawyers and a longer more formal Purchase Agreement is drafted. Among the important provisions of Purchase Agreement:
- Specifying a “due diligence” period
- Detailing what is being purchased: real estate, inventory, equipment, customer lists, intellectual property, website, the logo/name of company/brand, etc.
- Representations by the seller — financial status, revenue, ownership, etc.
- Warranties by the seller
- Indemnities
- Default and damage provisions
- And more
Buying a San Diego Business: Due Diligence
The next stage is the due diligence stage. Here, there are generally four main areas of focus:
- Documents and contracts,
- Verification of financial information,
- Review/inspection of the tangible aspects of the deal like inventory, equipment and any real estate, and
- Obtaining waivers, approvals and compliances from lenders, third parties, and governmental agencies (as needed).
If the due diligence shows that all the aspects are “good,” then the deal moves to the next stage. On the other hand, if there are problems, then the deal dies or is renegotiated. The latter is more often the result since, many times, problems are fixable with a closing credit or price adjustment or some other modification of the contract.
Buying a San Diego Business: The Closing
After all the due diligence is done, the closing is scheduled. In general, all the necessary and relevant individuals meet in one location and all the final papers are signed. Money and keys and other items are exchanged and mostly, the deal is done. There may be some post-closing tasks such as recordation or an escrow, but, in general, the closing is the final stage.
Contact San Diego Corporate Law
For more information, contact experienced corporate attorney Michael Leonard, Esq. of San Diego Corporate Law. Mr. Leonard has many years of experience helping San Diego residents buy and sell their businesses and franchises. Mr. Leonard can custom-draft the purchase agreement and can conduct all the necessary due diligence and closing requirements. Mr. Leonard has been named a “Rising Star” for three years running by SuperLawyers.com. Contact Mr. Leonard by email or by calling (858) 483-9200.
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