CHAPTER 5 Purchase Price
In a sense, no term of the transaction is more important to the buyer and the seller than the price to be paid. This chapter introduces the forms of consideration that may be offered and paid in a deal, and how those payments can vary or be adjusted based on facts that exist at closing or even performance that occurs after closing. This chapter also discusses the incentives that purchase price provisions give the parties, and how to control for and counterbalance those incentives.
Types of Consideration
Cash or stock
The purchase price can take different forms. Cash consideration is the simplest form of payment. The seller can also be paid in equity of the buyer. Equity consideration raises additional issues, such as whether the issuance of stock by the buyer must be registered under the securities laws, and the extent to which the seller will need to conduct due diligence on the buyer, and ask for (and receive) representations from the buyer.
Fixed or contingent
The consideration may be fixed or contingent. If the purchase price is contingent, it can be adjusted as of the closing date or can be subject to a post-closing adjustment. An adjustment for matters that exist as of the closing date is referred to simply as a purchase price adjustment ...
Get Make the Deal now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
