What Nobody Tells You About Buying or Selling a Business

Lawyer, legal advisor, businessman brainstorming information on agreement details Business contracts in legal processing books for accuracy in contract documents. joint financial investment.

People tend to think the closing of a business acquisition or sale is the finish line.  It feels like that to the parties involved.  The letters of intent, the due diligence requests, the negotiation sessions, the late nights reviewing documents, and then finally the closing table. There is a natural tendency, once the documents are signed and the keys change hands, to shift attention toward what comes next. The deal is done.

What experienced buyers and sellers understand, and what first-time participants often learn at considerable expense, is that closing day is not the end of the transaction. It is the beginning of a phase where every representation made, every financial projections, and every clause in the purchase agreement gets tested against reality.

We recently represented a client who was selling his retail nutrition supplement business. Inventory was among the most significant assets being transferred and, unlike real property or equipment, inventory is a constantly moving valuation. Product is being purchased, received, and sold right up until the moment the deal closes. A static valuation made weeks before closing would not accurately reflect the company’s value. We spent considerable time negotiating post-closing inventory and working capital adjustment provisions and drafted clear, enforceable language into the asset purchase agreement that protected our client’s position when the transaction closed. He was paid for the assets he actually transferred, not an estimate that no longer reflected the business on the day it changed hands.

That kind of protection does not happen by accident. It requires experienced counsel who understands both the legal structure of the deal and the operational realities of the business being sold, and who builds those realities into the documents before signing.

Post-closing disputes arise when that work is not done or done sloppily. Working capital adjustments calculated differently because the methodology was never precisely defined. Earn-out provisions that neither side interprets the same way once performance is measured. Indemnification obligations that were described broadly in the letter of intent and quietly narrowed in the final agreement. By the time these issues surface, the capital has been committed and the transaction has closed. The question becomes whether the deal that was made matches the deal each party was promised and intended to receive.

In our experience, the answer to that question is almost entirely determined by what happened before closing, in the precision of the documents and the quality of counsel who drafted them.  If you are considering an acquisition or preparing your business for sale, reach out to discuss how we can help you protect you.