When a small business in Colorado is being acquired by another business, one item that must be successfully executed is an acquisition agreement drawn up by the seller’s attorney. This document protects the seller’s interests as much as possible. There are numerous provisions an acquisition agreement should address.
First, the acquisition agreement should state whether the parties are executing a merger, asset purchase or other type of transfer. The sale price and any other relevant financial terms should be included in the agreement. If it is possible for one side or the other to adjust the price, this should be addressed in a manner that ultimately reduces the risk that the price will go down.
Any milestones for earnouts should be addressed in the acquisition, as should any contingencies on payouts. Where stock will be issued to the selling shareholders should be addressed as should any rights or restrictions that may be applied to those shares.
Escrow should also be addressed — both the amount of the indemnity escrow and how escrow will be handled should one party fail to hold up their end of the agreement, that is, breach it. Closing conditions are another item that should be included in an acquisition agreement, as well as any warranties. Provisions for terminating the acquisition agreement should be included, as should the responsibilities of each party for obtaining necessary governmental approvals.
There are more provisions than just those listed above that should be included in an acquisition agreement. Both parties, particularly the seller, want to ensure the acquisition agreement is fair and serves their best interests.