When you are buying or selling a business, the close is a special day. It is a chance to see all of your hard work in executing the transaction come to fruition. All of the long nights pouring over paperwork, negotiating terms, and wading through all of the formalities and red tape have led to this.
If you are the buyer, the closing is when the business you are acquiring will actually become yours. As the seller, it is essentially the day you can wipe your hands clean of your former company and perhaps take a vacation—unless, of course, you’ve agreed to stay on as a consultant. It is also the last real chance either party will have to change their mind.
But what can you actually expect from the closing? Well, if you’ve ever bought a home, it’s a lot like a real estate closing.
However, a business sale closing may actually be a little less complex than a real estate closing. As long as bank financing is not involved in the purchase of the business—as it almost always is when purchasing a home—your closing will not be subject to all of the regulatory requirements that real estate lending is subject to.
In fact, without an outside lender requiring some sort of specific closing regimen, the buyer and seller—and of course their respective legal counsel—have a great deal of freedom to conduct the closing however they see fit and however works best for their unique circumstances.
There are a couple ways your closing will usually occur. If you have elected to utilize an escrow agent to conduct your closing, the closing process will occur over time with both parties signing documents as aspects of the deal are negotiated and agreed upon. The escrow agent will hold all of these documents and once they have all of the necessary documentation, the agent will release the funds and “close” the transaction without any ceremony or fanfare.
It is generally more common, though, to utilize your attorney to close the deal. In this case, the buyer and seller will usually meet on a specific day at one attorney’s office or the other to actually conduct the closing “ceremony.”
A this point in the transaction, most of the hard work will have been completed. Due diligence has been conducted and finalized, all of the details have been hammered out, the necessary agreements have been drawn up, and prices and timelines have been negotiated and settled upon.
When you meet at the attorney’s office for the closing, it will provide a last chance to review the documentation to ensure no mistakes were made and nothing was left out. Any needed last minute adjustments can be made at this point. The buyer and seller will then sign all of the necessary documentation.
Next, as with a home purchase, there will be a transfer of funds and an exchange of documents that convey ownership of the assets or shares being sold, depending on how the transaction has been structured.
At this point, the transaction is complete! What happens next will depend on how you’ve agreed the transition will occur. It is not uncommon for there to be a transition service agreement between the buyer and seller wherein the seller agrees to provide certain services to the seller (i.e., billing and collection, management services, etc.) during a transition period while the buyer is getting up to speed.
Your attorney will assist you throughout the closing process to ensure your company’s interests are protected and that everything goes as planned. If you are interested in purchasing or selling a business, it is vital that you enlist the services of a skilled business attorney to help get you to your closing day. Contact the law offices of Brown & Sterling today to learn more.
