Business Purchase Transactions

The Lapin Law Firm provides high quality and cost-effective legal services to sellers and buyers of business enterprises. Our services include client counseling, negotiation of legal and business terms, and contract drafting and review.

As an initial matter, we will work with you to determine and negotiate the ideal transaction type to facilitate the purchase of the business. Two of the most common structures for business sales are (1) an Asset Purchase Transaction, and (2) a Stock Purchase Transaction.

Occasionally other structures are employed to achieve the desired outcome (such as mergers, for example). Each transaction type presents its own unique legal and tax features, which may benefit one party over the other.

For example, buyers often realize a tax benefit by structuring a business purchase as an Asset Purchase Transaction, especially where the target business owns substantial tangible assets. One of the very early tasks in business purchase deals is negotiating and reaching agreement on the transaction type to be employed in the deal.

Once the parties come to a general agreement on the structure and key terms of the deal, a Letter of Intent (or an “LOI”) is often shared and signed by the parties. These letters of intent are typically non-binding with respect to the transaction itself. (Letters of intent often specify that certain provisions in the letter of intent are binding, such as, for example, confidentiality and no- shop provisions.)

Despite lacking binding effect, we find that properly drafted LOIs provide several benefits. First, the LOI affords each contracting party an opportunity to learn a lot about the other party’s (and its attorney’s) nature before investing heavily in the transaction. Is the other party cooperative or stubborn, reasonable or aggressive? If the other party is going to be a difficult one to deal with during the negotiation and drafting process, you will want to know that upfront, and the LOI is a relatively cheap way to test the waters.

The unfortunate alternative is the realization, only after spending a lot on the preliminary drafts of the definitive contracts, that the other party is unreasonable or uncooperative.