Lawyer for business mergers, acquisitions, divestitures and other transactions.

BUSINESS PURCHASE: CLOSING

 Business Purchase  -  Letter of Intent  -  Due Diligence  -  Negotiations  -  Asset vs Share  -  Purchase Agreement  -  Closing

Contact Neufeld Legal PC at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

The closing of a business acquisition is the final, pivotal step where all legal and financial requirements are met, and ownership of the business officially transfers from the seller to the buyer. While often anticlimactic after months of negotiation, this is when the deal is legally finalized.

The closing process happens after the preliminary stages of due diligence and negotiation. A closing can happen either simultaneously with the signing of the purchase agreement or on a separate, later date, which is more common for complex deals. Business closing activities can include:

  • Finalizing Documents: The buyer's legal team drafts a comprehensive set of closing documents. These are reviewed by both parties and their legal counsel to ensure all terms of the purchase agreement have been met.

  • Fulfilling Closing Conditions: This is a critical step where all conditions outlined in the purchase agreement must be satisfied. These conditions can include:

    • Regulatory Approvals: Gaining clearance from government bodies.

    • Third-Party Consents: Securing permission from landlords, creditors, or key business partners to transfer contracts.

    • Financing: The buyer must have their funding secured and ready for transfer.

    • Pre-Closing Audits: The buyer may perform a final "walk-through" or inspection to ensure the business's assets and condition haven't changed since due diligence.

  • Signing: All parties, including the buyer, seller, and their respective lawyers, sign the final stack of legal documents. In many cases, this is done virtually.

  • Transfer of Funds: Once all documents are signed, the buyer transfers the purchase price to the seller. This is often done via wire transfer or through a neutral escrow agent who holds the funds until all conditions are met.

  • Transfer of Ownership: With the funds transferred, the legal ownership of the business is officially handed over. This includes:

    • Handing over keys to physical locations.

    • Transferring intellectual property, contracts, and leases.

    • Giving the new owner access to bank accounts and corporate records.

A typical business acquisition closing requires a transaction-specific legal documents to formalize the business purchase and protect both parties. While the specific list can vary, key documents often include:

  • Purchase Agreement: The main legal contract that details the terms of the sale, including the purchase price, assets or shares being sold, representations and warranties, and post-closing obligations.

  • Assignment and Assumption Agreements: These transfer liabilities and obligations, such as contracts, from the seller to the buyer.

  • Promissory Note: If the seller is financing a portion of the deal, this document details the buyer's promise to pay back the outstanding amount over time; which could be further supported by securitization documents (i.e., indemnification agreement, personal guarantee, guarantees acknowledgment act certificate).

  • Non-Compete and Non-Solicitation Agreements: Contracts that prevent the seller from starting a competing business or poaching former employees and customers for a specified period.

  • Closing Statement: An itemized breakdown of all financial debits and credits for both the buyer and seller, similar to a settlement statement in a real estate transaction.

The time it takes to close a business acquisition can vary widely depending on the complexity of the deal. While smaller, straightforward cash deals can close in a matter of days or weeks, larger or more complex transactions, especially those requiring regulatory approval or extensive financing, can take several months. A typical timeline from the signing of a letter of intent to closing is 45 to 90 days, though it's not uncommon for it to extend to six months or even longer.

For knowledgeable and experienced legal representation when purchasing a business, contact corporate business lawyer Christopher Neufeld at Chris@NeufeldLegal.com or 403-400-4092 / 905-616-8864.

 

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Business Acquisition Goals