Insights

The Purchase Agreement

Steps to Selling your Business Part 37.

The purchase agreement is the kingpin of the sale process—a binding contract that will significantly impact the next stage of your life.

Your Advisors must play a crucial role in shaping the final terms of the agreement to your advantage and have a responsibility to ensure they clearly explain the implications of every word in every clause.

There is still high-stakes work to complete at this stage, but if your team has done their job well, there shouldn’t be any big surprises or heart-stopping last-minute battles for ground.

I don’t believe in fine print—before signing a purchase agreement, the entire document needs to be fully understood.

I want to offer a few simple bits of wisdom to remember as the purchase agreement is drafted and presented for signing—little things you and your team should keep in mind if you want to end strongly.

1. Stick to the timeline

I return to the French proverb Stillwater staff frequently hear in our office: Everything that drags gets dirty.

One of our duties here is to keep the momentum going. The buyer needs time to think but not second-guess. This involves coordinating communication between parties to ensure they are all invested in moving the transaction forward with a sense of urgency.

For this reason, our goal is to have a drawn purchase agreement from the buyer within the first month of signing the letter of intent.

2. Only deal with lawyers who have extensive M&A experience

Resist the urge to bring in a former colleague or a successful real estate lawyer.  They may be the best at their game, but M&A is a specific and nuanced field. Ensure that the people drafting and reviewing the document have specific, specialized experience in M&A. Not only will they take care of things others might miss or misunderstand, but they will also better protect you and reduce your stress through the closing process.

Many difficult closings we have experienced can be traced back to lawyers not having deep current M&A experience.

3. Remember that the seller gives direction to the lawyers, not the reverse

I believe in front-loading negotiations early in the process. We do this because, while lawyers are critical members of the team, it is essential to limit their role in negotiating the commercial terms of the sale of your business.

Listen to their advice, but always wear your “commercially reasonable” hat – the same one you used to build your business. This is your deal, and no one is more invested in the outcome than you. If lawyers are digging in their heels on something you know is non-negotiable, say no and be prepared to walk away.

4. You have a team

With over 100 transactions completed, and a 95% closing rate, Stillwater brings industry-leading expertise to selling your company. Still, experience has shown us that the best transactions happen when they are approached as a collaborative exercise.

Choose your team intentionally. When we sit down as your M&A Advisors with your financial planner, tax advisors, lawyers, and confidants and get everyone working together as a team, your success is nearly guaranteed.


If you are planning to divest your business or have questions for one of our Advisors, please contact our team today.

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Written by: Douglas Nix