SAN DIEGO STOCK PURCHASE ATTORNEYS
Expand Your Business Through Purchase of Another Company's Stock
One method to buy a business, or take an ownership position within a corporation is known as a “stock purchase”. In this form of business transaction the “buyer” obtains the selling shareholder’s stocks, taking the place of the seller in the ownership of the company.
A stock purchase agreement is developed to identify all of the terms to the transaction between the parties including basic information such as purchase price, the number of shares to be procured and the method of payment or value to be exchanged in return for the stock.
The stock purchase agreement must accomplish a lot more than simply transferring ownership from one party to another. It must establish an outline of the potential deal on the table, the process of the transaction, timeframe for due diligence, set asides for indemnification and valuation adjustments, as well as the representations and warranties upon which the transaction is based. Stock purchase agreements are quite legally and financially complex, and it is important to work with the experienced business merger and acquisition attorneys at the Watkins Firm who will foster the relational aspects of the transaction while protecting your legal and financial interests.
The Watkins Firm has worked with thousands of business mergers and acquisitions across almost four decades here in San Diego and Southern California. You need the proven legal skill of the Watkins Firm to provide sound advice and counsel and protect your interests throughout this important transaction.
We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today to learn more about buying or selling a business, mergers or joint ventures.
An Overview of a Southern California Stock Purchase Agreement
What are the elements of an effective Stock Purchase Agreement in San Diego and Southern California? Generally speaking, the primary issues addressed by the stock purchase agreement include but are not limited to:
- Purchase and Sale -The terms of the sale of stock in the transaction including purchase price, adjustments, allocations for tax purposes, and a process for resolving disputes
- Representation and Warranties of both parties
- A Demand of full and complete disclosure
- Documentation – important contracts associated with the transaction including leases, loans, mortgages, maintenance and supply contracts
- Tax Analysis – disclosure and review of all taxes associated with the acquisition including payroll, sales, property and income taxes and specific tax issues associated with the buyer and seller
- Employment – issues associated with existing employees, wages, benefits, key employee retention, employment agreements
- Indemnifications / Set Asides – detailed process for indemnification of income/expense differentials, unforeseeable liabilities and other costs during transition
The Importance of Due Diligence in a Stock Purchase
It is virtually impossible to overstate the importance of due diligence in a stock purchase transaction. Most industry and collegiate research on the matter of acquisitions estimates a high failure rate of between 60 to as much as 85%. How can you increase the odds of success and what is the importance of due diligence in a stock purchase?
The two biggest reasons for failure in a stock purchase transaction are a lack of due diligence and a failure of the two entities to successfully combine culture and operations. Success in a stock purchase transaction comes down to the analysis, verification and management of a host of important details associated with every facet of the transaction.
The Watkins Firm has developed an extensive library of checklists and contracts as well as a thorough process based upon hundreds and hundreds of successful stock purchase transactions across almost four decades of service to the San Diego and Southern California business and medical/healthcare communities. It is important to carefully assess and verify every detail of the transaction. Verification of the representations and warranties of the parties ensures our clients have extensive insight into the situation as it is, the process for moving forward to a successful conclusion of the transaction and the potential challenges which might arise.
Due diligence protects every party in the transaction. Whether our client is the buyer or the seller there are a large quantity of facts which must be ascertained and verified. There are important risks associated with known liabilities, contingent liabilities as well as the unique aspects of the market and the company’s position within that market. Is the market for the products and/or services of the target expanding, contracting or stagnant? Due diligence should also encompass protections regarding existing employees, key personnel and significant customers of the business. The success of our clients in these transactions is directly related to the quality and detail of our extensive due diligence services.
The stock purchase transaction can prove to be a tremendous business opportunity for both parties. There is a substantial amount of information which must be disclosed and verified. Substantial risks are present at every step of the process. A well-crafted stock purchase agreement guides our clients through the transaction and in the crucial period which follows. This allows for contingencies to be anticipated and either avoided or resolved. It ensures goodwill and the success of the business and it’s employees transfers smoothly.
Are you considering a stock purchase transaction in San Diego or Southern California? We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
When Does a Stock Purchase Make Sense?
There are two principal ways to acquire an existing corporation or business: a “stock purchase” or an “asset purchase”. A stock purchase is attractive for differing reasons from the perspective of the “buyer” and the “seller”. For the seller, a stock purchase may allow the proceeds to be taxed at a much lower rate while avoiding additional corporate taxes (such as in a C Corp). Sellers may be less responsible for future liabilities and risks associated with employee disputes, business and product liabilities, outstanding corporate financial obligations and other business risks. An effective stock purchase agreement may apply some of those risks back to the seller, and this is an area of critical focus during the negotiation of the agreement.
Buyers are often concerned by these risks and contingent liabilities, as well as the stepped up “basis” for future tax valuation. However, there may be specific types of assets or intellectual property such as patents or copyrighted materials, or if it has government or corporate contracts that make an asset purchase unfeasible. In these cases the corporation (as opposed to the shareholder or owner) retains ownership and a stock purchase preserves the overall viability of the company. A stock purchase may also preserve valuable customer and vendor relationships that can be disturbed by a highly visible corporate transaction.
Managing the Risks and Resolving Disputes
Managing the risks and resolving disputes associated with a stock purchase transaction is another important reason to consider the experienced, proven stock purchase lawyers at the Watkins Firm. The Watkins Firm has a successful track record of dispute resolution and trial victories across almost four decades here in Southern California. We take a unique approach to disputes and business litigation which is specifically designed to resolve the dispute in a timely and cost-efficient manner.
Your Watkins Firm attorney resolves the majority of the business disputes faced by our clients through effective, leveraged negotiation. This is the fastest and least expensive strategy for resolving any business-related dispute or lawsuit. Our extensive experience in mediation, arbitration and ultimately at trial provides our clients with the strength and comfort of knowing they have a powerful and proven legal team behind their side of the equation.
Strong, Experienced, Proven Stock Purchase Attorneys in San Diego and SoCal
Are you searching for a strong, experienced and proven San Diego and Southern California stock purchase attorney? Stock purchase transactions require a legal partner with the knowledge, skill, experience and resources to protect our client’s interests, foster a successful transactional atmosphere and ultimately guide them through a complex financial and legal process to complete a successful stock purchase agreement and transaction.
Are you ready to take the next step in your business journey? You need the experience and proven legal skill of the Watkins Firm on your team.