Description

Mini-APA Series: Purchase Price and Closing

Last week, we covered the basics what exactly is an APA; how is it different than equity, the parties to the agreement, what you are selling, what you are not selling.

This week we want to talk about the fun stuff: Purchase Price and Closing

Purchase Price

• Different ways to describe it, one number, one number plus other payments later, a multiple of SDE, etc.

• Get into SDE in a bit

• First want to make sure you confirm the number is correct and when does it get paid

  • Escrow/release of escrow

• Deferred payments

  • Hold back

  • Deferred Payment

  • Stabilization payments

  • Earn Out Payments

• Other deferred payment issues

  • When are deferred payments made?

  • Performance based Earn out payments

    • What is the calculation

    • Are there caps on things like operational overhead?

    • Do you have access to books and records to confirm performance targets

  • Can these be used for set off?

Inventory Payment

• When is this paid

  • All types of options

    • Paid in full

    • % of estimate then true up

    • Consignment

• Inventory estimate/reconciliation process

  • Seller estimates pre closing

  • Buyer determines final post closing

  • Must have ability to object to post closing

  • When is reconciled amount paid

  • Net working capital adjustments

Parting Shot – If you are about to be in a lawsuit, or maybe in a lawsuit, don’t email everyone in the world about it. Those are all discoverable. If a lawsuit is possible, phone calls only. Limit emails to attorneys. Don’t forward your attorney’s emails to other people!

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