Selling Your Startup

15The Purchase Agreement

In tandem with due diligence, both parties also work on the official purchase and sales agreement. This is where it gets real.

The purchase agreement lays down all of the legally binding terms and conditions of the transaction, including all of the details and conditions for the closing and beyond.

This moves you from the LOI (i.e., “We might be interested in buying something if all the numbers work out for us”) to “We're ready to sign the contract and close the deal.”

There is a lot at stake here—not only a lot of money but also your team's careers, your customers, your credibility, your reputation with investors, and what you'll be committing to for the next several years.

The purchase agreement may be the single biggest and most impactful document you will ever sign in your life—probably the most significant until you sell another company. So, what should you be looking for in this document? Who should be helping you?

Of course, the lawyers are going to be heavily involved in this process. There's a good chance a lawyer will write up the original document, though there is more flexibility here than you might first perceive—and it always pays to be proactive.

Buyers may want to prepare and send the first draft of the purchase agreement, especially if they are active in M&A.

The first draft is the start of really meaningful negotiations. Multiple rounds of back-and-forth and refinement should be expected. In the name of preparedness, it's a good idea ...