In an earlier blog we started our list of Things Every Businessperson Should Know Before Buying or Selling a Business. That first item was “No Pig in a Poke”. Here is the second one to keep in mind:
2. Power of the Pen.
Common acquisition etiquette is for the buyer to draft all the purchase documents and for sellers to draft all the debt documents like notes and security agreements. This is because the buyer must live with the business going forward, while the seller is focused on getting paid among other things. Buyers, for various reasons, including cost savings, sometimes let sellers draft purchase documents. Often, however, they learn too late that the fees saved are often far outweighed by unfavorable language — or even entire structures — which the buyer could not dislodge in negotiation.