San Diego Business Purchase and Sale Agreement Lawyer

A Purchase and Sale Agreement for a Business sets out the final transaction between a buyer and a seller of a business. It is generally fairly detailed because each side generally has numerous points they are concerned with.  This document is normally negotiated after a formal Letter of Intent has been sent from the Buyer.  This is to ensures the Parties are on the same page with key terms without having to spend excessive monies on revising the purchase and sale.

LOKK LEGAL recommends for the Parties to involve us as early as possible in this process.  Ideally during the beginning of the due diligence process.  This way proper time can be allotted to review, negotiation, revision, and proper completion of your documentation.

It is very important to know what the business is purchasing.  The distinction of whether a Buyer is purchasing Assets of a business or Stocks of a business can change the legal liability as well as the value of what a Buyer is purchasing. In a Stock Purchase Agreement, a Buyer is usually purchasing any and all rights and liabilities that comes along with those stocks.  A LOKK LEGAL attorney can draft specific carveouts and exceptions for this under the purchase.  However, in an Asset Purchase, the Buyer doesn’t acquire all interests of the shares, it acquires the specific assets that is allocated within the asset purchase.  An Asset Purchase Agreement needs to therefore be specified as to the particular asset that is being included and what is not being included.  One can see the specificity of the contract language can be of paramount importance.  The burden of specificity generally lies with the Buyer of the asset to be clear and specific as to the asset that it is purchasing.  Rest assured, your LOKK LEGAL attorney is experienced in drafting clear and concise Asset Purchase Agreements that leave no room for interpretation.

When purchasing a business, one does not want to buy into a lawsuit.  That is why it is incredibly important to know the businesses all of the obligations, pending claims, tax liabilities and pending lawsuits.  Current, Pending, and Potential Liabilities need to be addressed in the Purchase and Sale Agreement in order for both the Buyer and Seller within the transaction to be adequately protected.  To look at the profits and ignore potential liabilities is to only see one side of the coin.  Your LOKK LEGAL Attorney will address and mitigate the risk of business liabilities within you Purchase and Sale agreements.

It is important to know that all Buyers are not the same.  If a Buyer assumes your liabilities in a sale, it normally doesn’t discharge your company’s obligations to a creditor, unless signed in a separate release, so a Seller’s ability to evaluate the Buyer’s creditworthiness is key.

How will the purchase price be paid?  When will the purchase price be paid?  What is the best way the pay the purchase price?  All at once?  Up front deposit? Are shares going to be used to purchase?  These are all questions that must be answered in a Purchase and Sale transaction.  Your LOKK Attorney can go through all of these questions and answer them for your particular situation for you as each and every situation usually requires unique answers.

Does your purchase price need adjusting before closing?  Sometimes an agreed upon price requires a price adjustment to reflect changes in the balance sheet or after finding issues in the due diligence period.  The parties will previously have agreed on a target net worth or some other financial standard that has to be met or exceeded at closing in order to support the agreed-upon price. The parties come into the business immediately after closing to make a formal audit as of the closing date, from which the parties draw a final figure. If this figure varies from the target figure the parties agreed on, there are upward or downward price adjustments. Upward adjustments represent an increase to the purchase price, to be paid by the Buyer. Downward adjustments represent a reduction in price usually paid from either the escrow, or by the Seller returning a portion of the purchase price.  These adjustments can be satisfied either by adding to or subtracting from the cash or deferred payment elements of the deal. Negotiation between the parties establishes precisely how these adjustments are to be made. Any adjustments or negotiations should be made by your LOKK professional so that you know they are done correctly and they are done correctly.


Warranties and Representations are very important because they are a series of promises about the purchase from both sides.  Very few deals close without any express warranties in the Purchase and Sale Agreement. Warranties often refer to balance sheets, incomes, liabilities, indemnities, and such. For instance, there may be a warranty that there is no pending litigation against your company “except for matters listed on Schedule [X] to this agreement”. If the company is being sued at the time, the pending lawsuit would be disclosed in some detail on the schedule as an exception to that warranty. Damages for breach of these warranties may include anything from invested legal and accounting fees to the loss of the anticipated bargain. These covenants should be taken seriously by the parties.

A Seller may be asked to commit that it will run the business in its normal fashion during the due diligence process until closing, and do the best it can to preserve relationships with customers, vendors and employees. If certain key contracts require the consent of the contracting party to transfer, it may be asked to devote good faith efforts to obtain that consent. The buyer will want continued access to the business, and to be kept informed of important business developments and results of operations. Your LOKK Attorney may also require a Seller to refrain from major changes in the business during the due diligence process, i.e. dividends or unusual salary increases.


Your LOKK Attorney will ensure that the Purchase Agreement states where and when the meeting will be held for signing the documents to transfer ownership, and for paying the purchase price. This meeting is called the ‘closing’. This section of the Purchase Agreement also describes the various other documents necessary for closing: employment and non-competition agreements, leases and the like.


Indemnity is the process through which one party (either the Buyer or Seller) agrees to make the the other whole if one of their warranties doesn’t hold true, or if they fail to do something they promised to do in the Purchase and Sale Agreement. Who takes on which kind of indemnity is very important in terms of risk and money.  Your LOKK Attorney will carefully structure the indemnity provisions within the Purchase and Sale Agreements to ensure you are in the best position possible.


Your LOKK Attorney will state within the Purchase Agreement when and under what type of circumstances a party can terminate his/her obligations to proceed with the deal, and if terminated who will get how much monies.  This can get very important because the whole due diligence process can be stressful and if it doesn’t close then each party needs to think ahead and have the option to terminate.

San Diego Business Purchase and Sale Agreement Lawyer

Business Law | Real Estate Law
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