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)