The economic aspects are usually the main focus of a business acquisition. That’s as it should be, but the legal side should not be underestimated. Ultimately, the business purchase agreement is the cornerstone of business succession and is intended to provide both parties with the greatest possible certainty and clarity.
The business purchase agreement is often drafted based on a letter of intent. This serves as a kind of preliminary agreement and summarizes the parties’ expectations regarding the key terms of the transaction. The first draft of the business purchase agreement can be prepared by either the buyer or the seller. During the subsequent contract negotiations, compromises are worked out for conflicting positions, and the finer details are finalized.
From the Letter of Intent to Signing to Closing
Once the parties have reached an agreement, the business purchase agreement can be signed. A notary is not required in all cases, but is often recommended despite the additional costs. In the case of a transfer of GmbH shares or if real estate is also being sold, a notary is required in any event. After both parties have signed the purchase agreement—the “signing”—the company has not yet been transferred. This does not take place until weeks or sometimes even months later, at the “closing.” This date for the economic transfer—usually the first day of the month or the balance sheet date—is specified in the contract.
The transition period between the signing and the closing should be kept as short as possible. However, there are also a number of matters that need to be clarified during this time, such as obtaining necessary third-party consents for the sale of the company or securing regulatory approvals.
