By Dr. John Psarouthakis, Executive Editor of www.BusinessThinker.com, Founder and former CEO, JP Industries, Inc., a Fortune 500 industrial corporation
This is the 15th of a Series of short articles on “HOW TO BUY THE RIGHT COMPANY” They will be posted at one a week
Here we briefly review the closing of the Acquisition deal. The key aspect of this step is the preparation and signing of the purchase agreement and other documents needed for closing.
Beyond the legal requirements of having a purchase agreement, the preparation of the document itself is an important aspect of the due diligence process. Because of the representations and warranties a seller is obligated to vouch for, frequently, problems surface during this period that you may not otherwise uncover. For this reason, it is very important to begin work on the purchase agreement as soon as the letter of intent is signed and you begin formal due diligence.
The momentum of closing and emotions attached to it may vary substantially, depending upon the type of seller with which you are dealing. With a divesture from a large corporation, you are less likely to deal with a fear of closing. The company has strategic reasons for spinning off the particular division you are buying. On the other hand, you may not have the closing momentum and urgency that builds when dealing with the private seller.
In addition to working out details of the purchase agreement during the due diligence process, you should concurrently work on the action plan for the days and weeks after closing.
Reference: “How to Acquire the Right Business”
by John Psarouthakis and Lorraine Uhlaner