Business Transactions

At Arckey & Associates, our practice extends to a broad range of business transactions, including sales of businesses. In 2010, our attorneys successfully negotiated over $10,000,000.00 in business transactions, including sale of businesses and commercial real estateand commercial contracts for its clients.

Legal Issues Related to the Sale of a Business

Our firm's typical sale of business transaction involves a small, closely held business, where the owner or owners wish to retire or otherwise slow down, to disengage from the stress of the day to day pressures of running a business, to pass the business along to another generation of the family, or where the owner is simply presented with a great opportunity to sell at a profit., The sale of a closely held business presents issues that every business owner should understand as part of the sale of business process. However, the process should start well before the company is placed for sale. A successful sale of a small, closely-held business begins many years before the sale with the development of an exit strategy. The exit strategy is an actual written plan developed by the small business owner, its legal counsel and other important and necessary professionals, such as the certified public accountant, estate and tax planning professionals, financial and insurance professionals, and even key employees. At Arckey & Associates, we have developed strong professional relationships with the necessary professionals to assist in the successful creation, implementation and execution of an exit strategy.

Determining Price

A fair price is what a willing seller and a willing buyer agree to. It may or may not be fair market value due to the many circumstances that exist at the time. However, the business owner should know well before the sale of the value of his or her company is they have adopted and adjusted a proper exit strategy. The buyer must undertake appropriate due diligence to determine fair value to him or her. This too requires a group of professionals assisting the buyer in the negotiation. In the end, a successful sale or purchase of a business is dependent upon numerous factors, including, the buyer's interest in the purchase, the interest of the seller in selling, the financial performance of the business, adequate financial disclosures, the general health of the industry, the valuation of the business' assets, both tangible and intangible, and the skills of the professionals surrounding the seller and buyer.

Stock or Assets Decision

There are really only two types of sale transactions - those involving a sale of the stock of a company, and sales of the company's assets ("mergers" are typically a form of stock transaction). Usually, small business sales are conducted on an asset basis, primarily because a sale of assets will cut off many general creditor claims to the assets being sold (not always, but often). There may be overriding reasons to sell stock, however, such as a key relationship with a third party customer, vendor, franchisor, or regulator that may be easier to accommodate if the business itself remains within the same company, which will typically result when stock is sold instead of assets. The stock or asset decision will drive much of the transaction, since generally "everything" changes with an asset sale (there will be a new buyer of vendor goods and services, a new seller of the business' goods or services, a new tenant for a leased facility and a new employer for the employees), while none of these changes typically occur with a stock sale. Also, the parties to the transaction will be different with the business itself being the seller in an asset deal, while the owners of the business will be the sellers in a stock transaction.

Choosing a Financing Method

Some business sales are financed by institutional lenders, other businesses are sold on a cash basis, and some sales are accomplished through "owner-carry" financing. For the business owner who will finance all or part of the sale (a very common structure for the sale of a closely held business), the reality that the owner will be leaving closing as a "banker" presents a large number of additional issues that must be planned for and documented. In addition, since the seller will have a long-term vested interest in the business's continued financial viability (the owner of the seller may be counting on the buyer funding the owner's retirement, for instance), owner-carry financing presents unique challenges from a future business health perspective.

Real Estate Considerations

Often the sale of a business will also generate the sale of the building the business is housed in. At other times, consent of a third party landlord for a lease assignment will be necessary.