What are the keys to a successful stock purchase or asset purchase in San Diego and Southern California?  How can the Watkins Firm’s 40+ years of experience help to ensure a successful mergers and acquisitions transaction?

The Details of the Transaction

What happens after the sale of a San Diego business or it’s assets is completed is determined by the details of the transaction.  Business acquisitions are not simply about a stock purchase or asset purchase, but are sophisticated agreements which manage the entire process from the letter of intent, representations and warranties, due diligence and ultimately the transfer of ownership and what will happen once the sale is consummated.  There are important logistical issues and decisions to consider at each step of the process.

One of the keys to a successful stock purchase or asset purchase is the Letter Of Intent or LOI and/or the Warranties and Representations associated with the transaction.  In a merger or stock purchase the LOI is an especially crucial document.  Many inexperienced sellers are unfortunately in a hurry to get the LOI signed and get the deal moving forward.

It is actually a strong buyer’s strategy to get the LOI signed with exclusivity but as few details as possible other than the purchase price and terms as well as the assets and liabilities associated with the deal.  This allows the buyer to string along the seller and get them to invest a lot of their time and money into the deal before the buyer starts renegotiating price and the finer details of the transaction.

This is why it is important to work with the experienced mergers and acquisitions attorneys at the Watkins Firm.  Mistakes made early in the process can result in the loss of hundreds of thousands (or millions) down the road.  Is working capital to be included as part of the purchase price?  How long is the period of exclusivity for the buyer?  How will the transition and any associated training be managed?  Will there be any form of escrow or holdback by the seller to ensure transfer of goodwill and the elimination of contingent liabilities?

How do you maintain leverage as the seller while protecting your interests and selling price?  What steps should a buyer take to lock in their exclusivity and maximize their opportunity to negotiate the most favorable outcome in these legally and financially complex transactions?

Due Diligence

Due diligence is another of the crucial keys to a successful stock purchase or asset purchase.  One must complete a comprehensive, thorough review of the warranties and representations, the books and financials, physical assets, intellectual property, key customers and employees, the products and/or services to be acquired as well as the viability of the marketplace and many other consequential transactional details.  The Watkins Firm has developed a proprietary library of proven, battle tested contracts and due diligence check lists.  We have more than 40 years of experience representing clients in due diligence and our proprietary checklists are one of the strong assets we add to our client’s side of the ledger.

How long will the due diligence period last?  Most request 60 to 90 days but is this in our client’s best interests? Should the timeframe be shorter (it can always be extended)? The effort to prepare for due diligence in advance of any potential transaction always pays for itself several times over.  This can also help to maintain the leverage of the seller’s position.

The Keys to a Successful Stock Purchase or Asset Purchase Are in the Details of the Transaction

The keys to a successful stock purchase or asset purchase are in the details of the transaction itself.  What happens after the sale of a San Diego or Southern California business is completed?  Will the agreement pass control of business banking accounts immediately from buyer to seller, or will new accounts be opened?  How does the seller ensure that all mundane issues such as the transfer of billing and releases of liabilities for things such as utilities?  How will the escrow account work, and what is the specific date and time when transactions will be accounted for by the buyer?

What happens after sale of a San Diego business is completed is determined through the careful crafting of the contracts and supporting documents governing the transaction at hand form the LOI to the final purchase agreement.  The proprietary contracts and documentation provided by the Watkins Firm helps our clients to gain accurate and valuable insights while establishing smooth controls and processes throughout the transaction.

What personal guarantees are in place by the seller, and have the landlords, lenders and other creditors agreed to and formalized agreements to release them personally from future liabilities?  How will the buyer protect themselves from any unforeseen liabilities that actually arise out of activities prior to the transfer of ownership that should remain with the seller (or be deducted from the proceeds)?  Will the seller remain active in the business, and in what capacity?  What are the specific responsibilities and duties of each party after the sale is completed, and for what period of time?

The details surrounding what happens after sale of a San Diego business is completed can seem painful to work through when contrasted with the excitement of the deal itself.  However, these issues are another of the keys to a successful stock purchase or asset purchase that can make or break the success of the transaction.

The attorneys at the Watkins Firm bring more than four decades of experience in thousands of M & A transactions into your service to ensure that all foreseeable details and issues are addressed within the agreement(s) and that future disputes and opportunity for litigation is minimized.  The quality of the LOI, due diligence and pre and post-acquisition agreements will determine the effectiveness of the transfer, and the operational success of the transaction at hand.

We invite you to review our recent Podcast Episode 13 – Mergers and Acquisitions as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.