On the recent webinar, we were asked “Is that period of exclusivity, a bit like a property contract?”
We can do it in two ways. We can do it either in the Terms Sheet, which is the exclusivity. The problem is it will end at some point. So generally we see exclusivity between 1 month to 3 months. That’s a general exclusivity period. The problem is when you get to that period, your generally just on a Terms Sheet.
You’re not forcing the seller into the transaction, because they haven’t got enough in terms of the meat or the detail of how it’s all working. If you want to go through that process and you want to lock them in, You need to go through the transaction documentation, which is the next step.
Transaction Documentation is the sale of a business contract or the share sale contract, and it might also be employment or consulting agreements. If you’re keeping on board the seller for a period of time, it might be shareholders agreements. There might be a few things that are part of it but let’s just think of it as sort of just broadly, the sale documents.
You can enter into the sale documents quickly and then have a right to pull out, On the basis of your due diligence findings or finance or any other terms. We call those conditions, Precedent. It’s like a funky legal terminology for giving you the right to pull out. So in relation to the question there, you would actually need to exchange contracts first. And that can be a really good approach, sometimes it’s not.
So, What’s the best way to protect you in this situation? Which way should we go?
Watch the full webinar video at, ‘ Acquiring a Business’ at https://learning.benwalker.com/courses/acquiring-a-business
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