Whether you are buying or selling a business, you need competent legal counsel to advise you from the initial stages of the deal through negotiating and finalizing the contract, conducting or responding to the due diligence, drafting the needed ancillary documents and finalizing the closing statements to the closing itself. I have represented both the buyer and the seller in both large and small transactions in various fields, from software houses to medical facilities and with a variety of business entities in various states and foreign countries. Throughout the deal, my emphasis is on comprehensive planning, practical solutions to problems that arise, careful drafting of all agreements to make sure they reflect the parties’ intent and making sure that my client stays well informed at all states of the transaction.
What is a NDA?
In the context of a business acquisition, a NDA or nondisclosure agreement is an agreement between the owner of the business and a potential buyer in which owner agrees to allow the potential buyer access to certain trade secrets and other confidential information about the business in exchange for the potential buyer’s agreement that they will not use the confidential information for any purpose other than evaluating whether they want to buy the business. It is critical that a NDA be drafted carefully as to scope and duration of the potential buyer’s obligation of confidentiality.
What is a Letter of Intent?
A Letter of Intent is a document which outlines the major terms of a purchase of a business and usually also sets forth the objectives for drafting the sale agreement and the time table for the deal. A Letter of Intent is usually non-binding as to those terms but which often binds the parties to various other terms, such as confidentiality, choice of law and exclusivity.
What are baskets and caps in a purchase agreement?
“Baskets” and “caps” are usually included in the indemnification section of the purchase agreement. A buyer wants the seller to represent various facts about the company that the buyer is purchasing and if those representations turn out to be wrong, the buyer wants to be made whole or indemnified by the seller. The seller doesn’t usually want to be reimbursing the buyer for nominal damages or to have unlimited liability for all that might go wrong with the business. The parties negotiate the minimum amount of damages the buyer has to incur before the seller will reimburse the buyer for those damages. This is called the “basket”. Similarly, the ‘cap’ is the maximum amount of damages for which the seller will be required to reimburse the buyer.