An asset purchase agreement crossed my desk recently with a provision that allowed the buyer to post a notice on the door that there was a pending transfer of the business.
Also included in buyer’s proposed purchase agreement was a provision obligating seller to maintain all customers, vendors, and employees or buyer can terminate the contract.
Upon review, it appears to me that this buyer was setting up seller to force the seller out of business so that buyer did not actually have to pay any money to eliminate its competitor.
It is critically important that confidentiality be maintained during the pendency of this type of transaction. There are many ways to do this:
- Prior to discussions on the drafting of the transaction documents, have in place a non-disclosure, confidentiality, and non-circumvention agreement;
- Set rules on buyer’s visitations to the business, as it will become clear to employees that something is up if the same “suits” walk in weekly/monthly; and
- Consider setting up separate email accounts and fax accounts for the transmission of confidential documents between your team (lawyer, accountant, and financial planner) and you as the principal seller of the business.
[This article is not to be construed as legal advice and does not create an attorney-client relationship.]