More... about Offer to Purchase

In our experience, we have found it best to prepare a detailed Offer to Purchase depicting the ‘business deal,’ more than the legal detail that should be left to a lawyer. It should include the value of and the valuation basis of the assets included. In a share sale, assets and liabilities included will typically be valued at balance sheet or book value, while in an asset sale, maybe at appraised value, or fair market value, or simply at agreed value. The agreement should schedule an Offer to Purchase Date,’ an ‘Acceptance Date,’ an ‘Adjustment Date’ and a ‘Closing Date’ with enough time between each to accomplish all that will need to be done to close the sale.

There are many issues to address and to be agreed within the Offer to Purchase. The most complete understanding of all we would typically include can be gained, probably, by reviewing a sample Offer to Purchase.

Simply stated however, we view the Offer to Purchase as the means by which to create and ensure a clear and detailed understanding between the buyer and seller in written form, that will carry through the due diligence and closing processes, and that will ultimately convey that clear understanding and agreement to the lawyer selected to prepare the purchase and sale agreement and other closing documentation that may be required.

The Offer to Purchase should be written ‘subject to’ due diligence and (particularly in a share sale) subject to Final Valuation Price adjustment.  There may be other subject clauses as well; subject to certain banking arrangements perhaps, sometime subject to acceptance by a third party, such as a franchisor, subject to assumption of lease perhaps. There are often matters, particularly those involving third parties, that cannot be or should not be addressed until the end of the diligence process, so as to maintain confidentiality about ‘the business being sold’ until all other subjects have been satisfied and withdrawn.

See sample Offer to Purchase (soon to be available)