The sale of a business can be a mutually gratifying experience for all parties. A buyer has the opportunity to grow their current business or start a new venture without the need to build everything from scratch, and the seller has the opportunity to cash-out on the years of hard work put into growing a successful business. However, the journey to the closing can be stressful if you do not know what to expect. Below is a quick primer on the acquisition process.

There are four main components of the sale of a business: the initial offer and negotiations that can be documented in a letter of intent, negotiations of the purchase agreement, the due diligence and the closing.

Letter of Intent

A Letter of Intent (LOI) or a term sheet should be used to memorialize the initial negotiations, which significantly and efficiently helps move the transaction along. The core terms of the transaction, such as, the purchase price, financing terms, and restrictive covenants, are agreed upon in the LOI. The LOI, however, is typically non-binding, which means that either party retains the right to walk away from the transaction. While typically non-binding, the LOI is still very useful because it requires the parties to come to terms on the important aspects of the transaction. Of course, the more that is laid out and agreed to in the LOI, the quicker the next stage of the transaction.

Purchase Agreement

Once the core terms of the purchase are agreed to, then it is time to move on to the purchase agreement. The purchase agreement is a binding contract that will be significantly more extensive since it will contain all of the terms of the purchase. In addition to the core terms covered in the LOI, it will include such terms as due diligence items/procedures, warrants/representations, indemnification, closing process, conditions for closing, dispute resolution, and confidentiality.

Due Diligence

Once the purchase agreement is executed the due diligence period will begin. Due diligence gives the buyer the opportunity to verify information about the business being acquired by reviewing the business’ financial records, contracts, assets, physical locations, employment records and any other information that is important to the buyer. During the due diligence period, the buyer typically has the opportunity to walk away from the deal without any penalty and for any reason. During the due diligence period it is also prudent to begin working on any third-party approvals that are necessary for the transaction, such as minority owners, landlords, mortgagors, secured creditors, or franchisors.


The closing finishes the transaction and officially transfers the business (or assets) from the seller to the buyer. The buyer will pay the purchase price, and the seller will execute all documents necessary to effectuate the transfer. Also, key personnel of the seller may also be required to execute post-closing restrictive covenants, such as a non-compete or confidentiality agreements.

As a business owner’s law firm, Ser & Associates regularly assists its clients in both buying and selling businesses. If you are interested in or already in the process of buying or selling a business, we would be happy to assist you in the process. Please feel free to contact us today at 305.222.7282. Also, please be sure to visit us at and follow us on Instagram, Facebook, and/or LinkedIn.


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