What are the Components of an Offer to Purchase? – Dale Eyeler – Northern California Business Sales

What are the Components of an Offer to Purchase?

AN OFFER TO PURCHASE SPECIFIES HOW THE SALE IS TO BE STRUCTURED:

Asset Sale: Involves the sale of specific assets including equipment, trade names, and inventory but generally does not include cash, accounts receivable, or accounts payable.
Stock Sale: Involves the transfer of stock in the company and effectively generally includes all assets and liabilities of the company.

AN OFFER TO PURCHASE SPECIFIES PRICE, TERMS, AND PAYMENT:

Total purchase price consideration
Cash due at closing
Assumption of debt (if any)
Seller financing terms – term, interest, security
Non-Compete compensation
Consulting income or earn outs

THE OFFER TO PURCHASE IS USUALLY SUBJECT TO CERTAIN CONTINGENCIES THAT ARE SATISFIED PRIOR TO THE FINAL TRANSFER:

Due Diligence (confidential information not disclosed by the Seller that the Buyer still needs to review)

Confirmation of financials, books and records
Financing arrangements
Lease assignment or negotiation of new lease
EPA Compliance
Licensing requirements
Franchise approval

OTHER ISSUES ADDRESSED IN THE OFFER TO PURCHASE:

Buyer and Seller warranties
Training
Covenant Not to Compete
Allocation of purchase price
Desired closing date
Date by which Seller must respond
Earnest money

ONCE AN OFFER TO PURCHASE IS WRITTEN, WE ARE OBLIGATED TO PRESENT IT TO THE SELLER. THE SELLER HAS THREE OPTIONS:

Accept the offer as presented
Respond with a counter offer
Let the offer expire with no action taken (rejection)