1. Use of a Business Broker.

Business owners facing these situations might use brokers to assist in locating a buyer for the business. Here are some things to think about in hiring your broker:

• Find someone that specializes in your business or industry.

• Check references including success stories and those deals that did not go so well.

• Have a clear contract with the broker including the services that will be provided, the fee structure and the termination provisions.

2. Use of Non-Disclosure and Non-Solicitation Agreements.

Business owners selling their business are encouraged to use non-disclosure agreements to keep the Buyer from disclosing the potential deal as well as any confidential information that may be turned over to the Buyer. Sellers will want to make sure they protect the confidential information of the business if the deal doesn’t happen. If the Buyer is allowed to meet employees, consider including in the non-disclosure agreement a provision prohibiting the Buyer from soliciting the employees of the business for a certain period of time.

3. The Letter of Intent.

When the offer or letter of intent arrives, make sure the business deal has been clearly covered so there is no confusion over the terms of the deal when the documentation stage starts. Also, Sellers need to understand what contingencies the Buyer has included which will allow the Buyer to get out of the deal without losing its deposit. For example, is there a financing contingency or a licensing contingency (i.e., a liquor license)? What are the terms and time frames of the contingencies? Sellers may want to do some due diligence on their prospective Buyer to make sure their ability to qualify for and obtain financing or to be a recipient of a key license is likely.

4. Due Diligence.

Consider having Buyers do some level of due diligence before making an offer in the event you want to limit your exposure to transaction costs if you feel the prospective Buyer may not be fully engaged to buy the business. Sellers may also want to work with their attorneys in using a sample due diligence checklist to prepare a due diligence package prior to soliciting offers that can be immediately provided to Buyers. This will allow you to limit the due diligence period the Buyer will need in its offer. Make sure your non-disclosure agreement is in place and consider not providing your most crucial trade secrets until you are into the documentation phase and you feel good that the deal is likely to happen.

5. Documentation and Closing.

Sellers should understand what they are agreeing to in the definitive agreements. For example, are the representations and warranties true and correct? What is the seller’s exposure in case they are not? How long do the representations and warranties survive? Is the Seller being subjected to non-competition covenants and if so, how restrictive are they? There are many aspects of the agreement that need to be reviewed carefully so the Seller knows that when the deal closes, he or she has limited the risk as much as possible of some type of post-closing claim by the Buyer. Once the documentation has been completed and the contingencies have been satisfied, a closing can be scheduled so the deal can be completed.

Although sometimes it can feel like a daunting process, Sellers who are prepared and have competent professionals assisting them can sell their business in a smooth professional fashion.

The information contained herein is not intended or be construed as legal advice. Please consult the legal counsel of your choice before making any decisions based on this content.

Russell N. Stein, Esq. is the chairman of RIW's Corporate and Business Law Group and a member of the Retail Food and Hospitality group.

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