In small business M&A, Buyers and Sellers often elect Asset Purchase Agreements for the conveyance of the business interest. The chief advantage of an Asset Purchase Agreement over an Equity Purchase Agreement is that Buyer, i.e. the Purchaser, can elect which assets and liabilities to acquire in the transaction.
A well-negotiated and carefully drafted Asset Purchase Agreement will contain the following provisions:
PART I: INTRODUCTORY CLAUSES (PREAMBLE)
Section A: Identification of Parties
Description: Name, Description, and Address of Buyer & Seller
Section B: Recitals
Description: Provides the general intent and purposes of Buyer & Seller
PART II: TERMS AND CONDITIONS
Section A: Purchase and Sale of the Assets
Description: Constitutes offer and acceptance of contract. The presumption is that all assets are included except for what assets are explicitly excluded. Also included is the assumption, if any, of any liabilities arising from assets or business. Purchase Price and how comprised is also included in this section. Closing date and conditions set forth in this section.
Section B: Representations and Warranties of Seller
Description: Assertions made by Seller about the truth and accuracy of the information pertaining to the subject assets.
Section C: Representations and Warranties of Buyer
Description: Assertions made by Buyer about the truth and accuracy of their information and capacity to contract.
Section D: Covenants of Seller
Description: Conditions to be undertaken or granted by Seller from contract signing until closing.
Section E: Post-Closing Covenants of Seller
Description: Conditions to be undertaken by Seller after closing.
Section F: Covenants of Buyer
Description: Buyer’s condition to cooperate with Seller in transfer of assets.
Section G: Conditions Precedent of Buyer
Description: Buyer’s assertion concerning truth of representations and warranties and covenants.
Section H: Conditions Precedent of Seller
Description: Seller’s assertion concerning truth of representations and warranties and covenants.
Section I: Indemnities
Description: Conditions regarding indemnification and who warrants indemnification and when.
Section J: Miscellaneous
Description: Catchall provision that provides choice of law, severability, dispute resolution, and headings and counterparts.
If you are a small business, hiring a skilled business attorney is crucial for success in any M&A transaction. Karpus Law’s business team utilizes their legal skills and substantive business experience to help guide small businesses through all stages of M&A.
If you are looking for competent and superior representation for your small business, please contact Karpus Law at Info@Karpuslawfirm.com or (973) 645-9453.
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