To do a deal, you have to have a purchase agreement.
Enter this guide to deal documents, for when you’re feeling at sea. Our hope is not to overwhelm you, but instead to empower you – to know what you’re reading, why it matters, and if it reflects what you’re trying to accomplish.
Navigating
Deal
Documents
The 50,000-foot View
The point of a purchase agreement is to take the business deal and what we’ve learned in due diligence and translate it into legal documentation.
But, if that’s all it is, why’s it so complicated?
First, while a business deal puts together the outline of what everyone wants to happen, it is, by definition, not able to contemplate all the possibilities of what could happen.
In addition to codifying the business deal, it’s meant to answer questions around what happens if something we didn’t previously talk about occurs. In other words, the purchase agreement is about risk allocation.
This resource.
Our goal is to empower sellers in reading and negotiating purchase agreements.
As buyers, we want sellers to be engaged in the negotiation process, not delegating deals to third parties. Why? It’s the only way to ensure that we’re working towards mutually beneficial outcomes. As a seller, no one knows your business better than you do.
And so our objective in creating this library of content is to create a reference such that if you enter into negotiations with us (or with anyone else), you’re able to (with the help of your attorney) understand what’s on the table: what's flexible, what's not flexible, what different players are going to advocate for, and how all of that is reflected in a purchase agreement.
Purchase agreements come in infinite flavors and varieties depending on type of deal, level of complexity, and the preferences of the individuals involved in crafting it. There are excellent examples of purchase agreements and legal definitions of individual section and terms on-line.
Rather than a re-hash of those resources, here we’re providing some context around different terms to help you identify why they’re important, what they affect, and how to read and interpret them.
To that end, you can click on any of the terms below to understand what it’s doing in the purchase agreement.
We’ve also sorted the terms into one of six buckets according to what they’re trying to accomplish in the purchase agreement:
Explaining the Deal: What am I selling? What’s included?
Definitions & Exhibits: How you know what’s important.
Risk Allocation: The “what if” questions.
Covenants: What happens after signing the deal.
Continued Disclosure & Fact-Finding: What else has come up?
Financial Reconciliation: Does the business at close look like “normal”?
These buckets don’t necessarily align with where the term will appear in the document or what section it will fall under. Use the filter buttons to the left to see and explore terms that are geared toward the same goal.
If you’re looking for the broad strokes, we’ve outlined the essential question driving the term as well as the highlights of what to pay attention to. Continue reading to get a little further into the weeds:
What is this?
When does it matter?
What should you look for?
