M&A Activity -- Expect a Surge in Mergers
The "Purchase Agreement" can be developed by either the buyer or seller, but most often is written by the buyer's attorneys. The sellers provide the Purchase Agreement in cases where the selling shareholders have strict go-no go requirements for a deal and where the sellers intend to conduct a formal auction for the company. In these cases, the seller will provide the Purchase Agreement to the buyer in the early stages of the auction to make its acceptance a part of the buyer's offer.
Purchase Agreements can range from 30 to 60 pages or more and thoroughly describe every aspect of a transaction.
These agreements are signed by both parties at closing and contain: (1.) full details and the buyer's commitments for the purchase price and its structural components; (2.) the assets or stock being acquired; (3.) the seller and buyer representations and warranties; (4.) the method of calculation and timing of the payment or deduction of a working capital adjustment; (5.) the non-compete/employment agreements for selling shareholders who may be staying on or are leaving the company; (6.) the timing and nature of any post-closing adjustments to the purchase price; (7.) the amount, conditions and timing for the release of any escrow being held by the buyer to cover any unforeseen seller liabilities; (8.) the basket and cap language covering any unknown or unscheduled liabilities; (9.) a delineation of any excluded assets or liabilities; (10.) and the term and financial limit for the seller's overall liability.
Your Motivations For Selling?
Potential sellers must carefully examine their motivations for selling and decide that they are valid before initiating an effort to sell the company. These motivations can include printing industry burnout; an unwillingness to step up to any more debt, whether personally guaranteed or not; a desire to retire; poor health; a lack of potential successors from among your children or relatives employed at the company; or a desire to gain liquidity by extracting your wealth from your printing company investment and reinvesting it in more lucrative or safe investments.