Business Transactions

If you are thinking of selling your business, you are most likely feeling overwhelmed with information regarding what the process is. If you are buying a business, you may have similar feelings. This can be a challenging process even if you have been through it before. Business transactions are complex and also often times lengthy. Here are some basics regarding business transactions.


Michigan business owners work extremely hard to ensure their business is a success. Many of these entrepreneurs believe that continued growth and expansion of their business can position it well to be sold. The problem that emerges is most business owners place very little to no preparation in how to best position their business for a future sale. Years of concentrating on the daily operations of their business can sometimes cause the owner to not see their true value from a buyers perspective. Most buyers do not wish to purchase a company in which they are just purchasing their future job. This adds risk to the success of the business post-transaction. Even if a buyer and seller are able to agree on terms, those terms are likely going to favor the buyer. Sellers should take steps to prepare their business for the change in ownership. Buyers should make sure they can fully assess the business before committing time and money to push a deal for purchase.


Confidentiality in business is critical. The reason your business is successful is because of the proprietary information you have created over time. So how do you start the process of buying or selling a business without disclosing too much information? The most obvious safeguard is to have a non-disclosure agreement or NDA in place early in the process. This agreement will outline what information is confidential, how the non-disclosing party will treat that information, and the ramifications of violating the NDA. Even with an NDA in place, there is a bit of a balancing act on when to disclose certain information. As a buyer, you want to have access to as much information as possible to ensure there are no surprises. Sometimes creative solutions can be implemented including a disclosure schedule where information goes from generic in nature to more specific as the deal gets closer to being finalized.

Letter of Intent

A letter of intent or LOI can be tricky. They seem informal and relatively benign. In reality this is a document that should not be drafted or executed without careful oversight. This document really lays out the terms of the business transaction. While these terms can change as more information comes to light, generally they remain pretty consistent. It is important to negotiate good terms in the LOI to avoid uncomfortable negotiations later in the deal.

The terms of the LOI are generally not enforceable but there are often terms that can be binding. The signing of a letter of intent is not going to bind the buyer into paying the purchase price listed in the LOI. Those types of terms are not binding until the purchase agreement is executed. At the same time, exclusivity terms and other restrictive covenants might be binding after the LOI is signed. If there is an agreement that there will be a 6 month exclusive dealing between the buyer and the seller, that can severely impact either party if they see that the deal is not going to get done. You have to treat the LOI like a binding agreement and not just as a mere formality to get the transaction going.

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Due Diligence

The due diligence period of the sale or the purchase of a business is an important time for all involved. Knowing what items needing to be disclosed, how to disclose them, organizing the disclosures and understanding what all that means towards the transaction can greatly influence the sale. It can be easy for a buyer to overlook certain details or a seller to believe certain disclosures are not necessary. These details in the sale of a business can lead to disputes after the transaction has already been completed. These disputes can be very expensive to resolve. It is critical that due diligence is thorough and complete.

Purchase Agreements

​Purchase agreements are complex documents that stand at the center of a transaction. These extensive documents lay out all the details and particulars of the sale. While a purchase agreement can be quite lengthy alone, they are supported by additional agreements, exhibits, and schedules. Even in small transactions purchase price, payment terms, what is being acquired, representations and warranties of the seller, representations, and warranties of the buyer, dispute resolution terms, and more are packed into one document that is supplemented by other agreements such as a lease, a non-competition agreement, a consulting agreement, an assignment and assumption agreement and more.

Every purchase agreement is unique to each transaction. There are even two different types of transactions that are common in business deals. Generally, there is either a stock sale or an asset sale. Whichever type of deal you and the other party agree to can greatly impact the contents of the purchase agreement.

The terms in the purchase agreement are binding and often replace any previous agreements between the parties. It is very important that these agreements are well-drafted because there are plenty of potential mistakes to be made in any number of areas. These mistakes can become huge issues after you believe the deal to be done.

Post Transaction

​Often one of the most overlooked portions of business transactions is the time period after the transaction has taken place. There is such a great effort and build up to make the deal come together that the parties can forget that there is a lot of work that has to be done post-transaction to make sure the terms of the agreements are complied with, federal, state and local statutes are complied with and that the business is successful as an ongoing operation. Very few deals are straight cash deals where the seller can walk away from the closing table and have no other obligations. Buyers have even more on their plates because they have to comply with the requirements of the deal but also have a new business to run. It is important that the closing table isn’t seen as the end, but rather, it is seen as a milestone for either the buyer or seller in getting to the true finish line of the deal.

The Law Offices of Joseph Nafsu are eager to help you navigate this process and continue to build on your success. Please Let Us Know If You Are Ready To Find Out More About Selling Your Business or Buying A New Business. We Are Ready To Help!

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