How To Get Buy Sell Agreements That Will Expedite The Process Of Selling Your Business Rather Than Impede It.
Legal agreements are intended to reflect the intent of the parties involved. Buy sell agreements must be constructed with that in mind. You will find that it is better to have one that is comprehensive, yet easily understood, so long as it correctly reflects the points you and the buyer agree on. You will find it less helpful to have one containing a multiplicity of one sided, complex clauses favoring either party.
Writing buy sell agreements is a specialized area. And is best done by someone with specialized knowledge. Normally this is done by an attorney. That does not mean that an initial agreement cannot and should not be reached and written by you or the buyer. It should contain the normal items such as price, terms if any, closing date, closing price, and anything else necessary to identify this unique transaction. It should be written in plain language, and easily understood by both sides.
This can then be converted into a formal buy sell agreement by an attorney. Many years ago, I was involved in securing a multi-year service supply contract, worth several million dollars per year. This service was critical to the buyer, and as the buyer was represented by a fine gentleman who reported directly to their company president. We had agreed to all of the business points in a written offer, which was accepted in writing, with the intent that it be converted to a formal contract.
This fine gentleman volunteered that they had expanded their law department, and suggested that he get the contract drawn by this law department. He would then courier it to me, we could both read it, and we would get together to go through it. And a date and time were set for this get together. Because of unforeseen delays, neither of us go to read it until the morning of our meeting. Me on the plane to meet him, and he in his office.
His first question to me was intended to seek my reaction to the draft agreement. My reply was that it didn't look much like what we had agreed to. He said that he felt the same way, and called the lawyer to his office. He then told him that there was no room in what we were doing for legal trickiness. He wanted the agreement to exactly reflect what was intended, and only that, except for necessary insurance clauses. He told the lawyer that the three of us would now go to an early lunch. After lunch the lawyer would get to work, and we would get back together after we had both reviewed the new document.
The point to take away from this anecdote, is that the buyer's representative understood the need for a clear, simple agreement, that accurately reflected the business points. He also understood that he needed to keep his lawyer on a short leash, so that the lawyer couldn't cause unnecessary delay or conflict. That is how you want to approach constructing the buy sell agreement.
You don't want your lawyer to load the agreement with all manner of clauses to your benefit, but to the detriment of the buyer. There are standard clauses that must be a part of any buy sell agreement. That's why you want a specialist to prepare it. However, you don't want the buyer to think that you are trying to put one over on him. At worst that could cause the sale to fall apart. At the very least it will introduce an element of delay. It will also cause the buyer to become suspicious of you, thinking the offending clause or clauses were inserted at your direction.
The combination of suspicion and the need to negotiate away the offensive clauses, will lead to delays in concluding the transaction, and closing. And as you have probably learned, the longer it takes something to happen, the easier it is for it to not happen.
Make sure you maintain control over the contents of the buy sell agreement. Don't let your lawyer get tricky and insert one sided clauses in your favor. Make him stick to the script provided, with the discretion to add the necessary boiler plate language.
In searching for someone to prepare the buy sell agreement, you want someone who has done it before. Like in most things, you don't want someone practicing on you. It is also quite helpful if he has done it before with a transaction in your industry. There may be some items peculiar to that industry that need inclusion, and someone familiar with them can add value to the transaction.
If you need help in finding someone to prepare a buy sell agreement, the business valuator can likely refer someone appropriate. Make sure you question their experience when you get the reference. Or you can discuss it with your outside accountant. He may be able to refer someone, particularly if he does considerable work for businesses similar in size to yours. If he is in a large firm, be careful, as he may be obligated to refer their firm specialist. He may be good, or he may not be. If you don't like him don't hire him.
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