South Jersey Business Brokers: Article About Documents A Broker Will Help Prepare
When you list your business for sale, there is considerable paperwork involved. From organizing your financial records, to creating customer and inventory lists, assembling vendor contracts, disclosing legal settlements, the preparation can seem overwhelming. Your South Jersey business brokers bring a level of expertise that allows them to assist you with document preparation and explanation. Below are a few documents that will help you prepare and understand.
The Letter of Intent is a non-binding agreement between buyer and seller that specifies the buyer's interest in the seller's business. It typically states the terms and conditions set forth for the purchase of the business. The buyer states what they need to move further along in the purchase process and the seller states their agreement to negotiate with the buyer on the purchase.
Your broker can help you review and draft a Letter of Intent that includes terms and conditions as close as possible to the final contract. But since this letter is not legally binding, the terms and conditions can change. It is best to have a detailed Letter of Intent to include as many specifics regarding due diligence, terms of sale, closing, and target dates. The better the Letter of Intent is, the easier it is to draft final documents. Also, there will be less terms to negotiate for the final documents if they have been agreed upon and outlined in the Letter of Intent. The buyer will typically perform due diligence after submitting a Letter of Intent and both parties execute it.
Sometimes if a detailed Letter of Intent is not used, then a Business Sale Term Sheet may be used.
The business brokers from Selby Associates of South Jersey would be happy to answer any question you have about business valuations or business acquisitions.
A detailed Letter of Intent can substitute for a term sheet and this should be discussed with your business broker. If a detailed Letter of Intent is not used, then the term sheet will describe what's being purchased, for how much, and how the purchase will be financed. It may also lay out terms for non-compete agreements, employee provisions, confidentiality agreements, and a projected date for closing. As the seller, you must review all of the terms and conditions and deem them acceptable. Your broker will help you review the term sheet and negotiate any terms before signing it. Your broker will assist you in evaluating these aspects of the document.
Final contracts will generally include purchase and sale agreements, non-compete agreements, confidentiality agreements and possibly other contracts like a lease. Most businesses will have an asset purchase agreement as the final document unless the transaction is a stock sale. These final contracts are legally binding and state exactly what is being sold, including tangibles, intangibles, goodwill, warranties, liabilities, fees, and a closing date. You will need help with this document because if anything is misrepresented then you won't be able to fix it once you sign the agreement.
Note that legally binding contracts will be prepared by an attorney and all contracts, even those that your broker drafts, should be reviewed by your attorney. Your broker's expertise allows them to participate in drafting documents so that they are done correctly and the terms are explicit and you have a successful closing.