Mergers and Acquisition matters are typically comprised of two elements:
- Business-to-Business Transactions where a business is looking to buy or sell something from another business. Typically, this refers to the sale of businesses themselves, or at least the transfer of assets, but can also involve commercial real estate or even succession planning.
- Due Diligence is the term lawyers use to describe the additional work necessary to enable the transaction and ensure all the information is accurate. For example, this could include purchase offers, letters of intent, financial reports, resolving compliance issues, drafting contracts, completing transfer paperwork, securing permits, reviewing leases, securing copies of tax returns, and the like.
Mergers and Acquisitions: JFB Law Representation
John F. Baker represents businesses at all stages of life, with competent, caring representation, and enables them to realize their goals. Over the last decade, we have been honored to serve business clients in Aurora, Illinois, and surrounding communities such as Naperville, Oswego, Wheaton, and Warrenville for cases such as:
Buying Businesses where you want to purchase another business’s assets or buy it outright. If you are a business, it’s likely you will primarily be interested in the assets. The process typically includes market research, business valuation, making or responding to an offer, negotiating the transaction, drafting a buy/sell agreement, securing the proper permits, and a closing.
Selling Businesses where you want to sell your business or business’s assets. Most buyers we see in the current market are businesses and therefore interested only in the assets, but JFB Law is experienced with either. The process typically includes market research, business valuation, setting a price, finding a buyer, making or responding to an offer, negotiating the transaction, drafting a buy/sell agreement, transferring everything, and closing on/enforcing the terms of the sale.
Mergers where two businesses are combining their operation, assets, and/or personnel under a new business or one of the pre-existing businesses. These matters have some similar elements to a sale (valuation and negotiation of ownership percentage and other consideration), but have additional elements as well, such as operating agreements to guide the operation of the new entity, employment agreements for new or newly-integrated employees, and filings necessary to change the name or start a new business in the event you choose to go that route.
Due Diligence, as discussed above, refers to all the research and paperwork that enables a deal. For example, business valuation is essential in any of these types of transactions. Other examples include inventory of assets, copies of financial paperwork (including sales reports, projections, analysis, and tax returns), transferring/securing permits, federal and local compliance, and employment/payroll records.
Succession Planning where you want to plan for what happens to your business when you retire. Typically, people plan to pass their share of the business to an heir, sell to a co-owner, sell to an employee, sell to an outside party, or sell their share back to the business itself. These matters involve many of the same tasks as buying or selling a business: buyers potentially have to be found, valuations need to occur, offers made and negotiated, as well as due diligence performed.
Commercial Real Estate where you’re looking to purchase, sell, or lease a piece of commercial property. Along with standard considerations such as valuation, finding a buyer/seller, negotiating a price, compliance, and buy/sell agreements, these transactions also require disclosures; reviewing, drafting, and negotiating lease agreements; deed and title transfer; as well as real estate closings.
Closings where buy/sell agreements or property transfers are finally executed. Typically, these proceedings are not complicated as they are mainly consisting of signing and exchanging documents and funds. However, complications can arise, resulting in additional last-minute negotiations at the table. We can also hold earnest money or other funds in escrow until the deal is completed or holdback clauses are satisfied.
Post-Closing refers to resolving any remaining tasks that have previously been agreed to after the closing (such as conveying assets or funds after a pre-determined time due to a holdback clause). Occasionally, a few details come up after the deal is complete that needs to be addressed as well – for example the other party didn’t disclose something. In these instances, we can help you negotiate additional payment (or other consideration) to make you whole. Further, in the event that the other party stops complying with the terms of an ongoing arrangement (such as installment payments), we can file a suit to compel them to.
Mergers and Acquisitions: What Matters to You
You deserve a lawyer that understands the stakes for you and your business when you undertake a transaction of this kind. As fellow businessowners, we understand what your business represents to you and your employees. You deserve a fair and well-researched transaction that protects your investment. You’ve already taken the first step on this path, let us get you what you deserve!
Here are the most common concerns we see:
What’s a reasonable price for a business? This question is impossible to answer without more information about the business in question. Many factors play into how much a business is worth: besides standard considerations such as revenue, assets, and expenses, there are industry considerations as well as market share and future growth potential. Ultimately the business in question with need to be assessed and have a valuation prepared. This is the best way to make sure that a fair price is reached.
What is earnest money? Earnest money is essentially a down-payment on a purchase agreement. More than that, it’s tangible proof that the buyer is serious about the deal in question. In the event that the buyer pulls out of the deal, the seller gets to keep the earnest money for their time. Though the exact amount can vary based on the agreement between the parties, you can expect to put down between 5 and 10% in earnest money when signing an agreement.
How long will this take? While, in theory, a deal could be resolved in a month, a more honest estimate is two to three months. At the end of the day, you want to pay a fair price and protect your investment, so it’s important to spend the time performing due diligence to ensure that you have all the facts. Nothing would be worse than rushing into a deal only to find a myriad of problems with your new business a few months later. Doing the research, securing a proper valuation, and reviewing the financial documents can make all the difference in the world. Note, this estimated time is predicated on taking a complete sale from start to finish, in the event that you bring a deal to us that’s already in progress, it will almost certainly take less time.
Let’s Discuss Your Needs
Mergers and acquisitions represent a sizable investment, so you want to do it right. If you’re looking to buy or sell a business (and are currently at any step of the process), call us at (630) 801-8661 and tell us how we can help.