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Phases of Buying A Business

Buying a business is a complex and time consuming process that can be broken down into four main phases.

Phase I: Confidentiality Agreement
Signing this document gives you access to sensitive information regarding the seller and their business. It also protects the seller by ensuring you will keep information disclosed during negotiations confidential. Example

Phase 2: Preliminary Negotiations/Letter of Intent
Both parties negotiate a letter of intent, which is non-binding and forms the basis for the definitive agreement. It outlines the deal structure, the purchase price and form, payment terms and closing contingencies. Example

Phase 3: Due Diligence
During due diligence - this vitally important phase - you will examine the business background, finance, human resources, tax and legal matters.

Phase 4: Negotiation/Definitive Acquisition Agreement
There are four main sections of the Definitive Acquisition Agreement: purchase price, representations, indemnification and covenants.