Once an offer to purchase has been made there will be “subject to” conditions that need to be resolved. A buyer training and transition period, a non-compete clause for a fixed period, building inspections, financing or inventory documents may be required. The offer may be accepted, rejected or countered. With a rejected or countered offer, you may decide not to proceed or you may present a counter offer. Once an offer is accepted, the Due Diligence period begins. A good faith refundable deposit is made usually with the broker or a lawyer that is increased to 10% to 20% of the purchase price once the conditions are removed.
The Due Diligence period is used to confirm the statements made by the seller to the buyer are true. The complexity of the business will determine the length of time needed from a few weeks to several months to wrap up. The Due Diligence is the responsibility of the buyer to complete.
Once the Due Diligence is completed and found to be accurate, a lawyer will draw up the final agreement of purchase. The legal fees are expected to be between 1% and 2% of the final purchase price. Once the buyer and seller accept the final agreement, the closing process starts.
When inventories are included in the sale, a final count and value is done or scheduled at a convenient time. The final value will be reflected as an adjustment to the closing price. All legal papers are signed, including “Non-Competition,” Training and Transition Timing, Leases and any other documents unique to the sale. The sale is now compete and the buyer becomes the owner.