What can be negotiated?

The price and terms of payment

The sale of a business is made up of a host of variables that affect the total value of the transaction. Obviously, we naturally think of the price of the transaction, the amount paid at the closing, the balance of sale, what are the terms of payment, the term of the transition.

Employment contracts, benefits

Other elements are less frequent and/or more subtle: will family members who work in the company keep their jobs? For how long? Special benefits: bonuses, expenses or other, which have been granted to key employees…

Real estate

Is the current lease still applicable, does it have a change of control clause? if the real estate is owned by the same shareholders, what will be the conditions, so many factors that are also subject to negotiation!

The adjustments

Adjustments to the selling price can be made with the final financial statements; is it dollar for dollar on the calculation of working capital? On the EBITDA multiple? On adjusted EBITDA? A calculation based on balance sheet items or results. Be careful to choose the right indicators and to understand the calculation methods!

This overview only represents quantitative and monetary aspects. There are others to consider.

The share purchase agreement does include representations and warranties.

The whole aspect of representations and warranties is then a point to clarify…

And what else…

You never know what else we may have to negotiate in a transaction…sometimes it’s the little things that catch on and risk that everything falls apart.