What are the most contentious issues when negotiating a Purchase Sale Agreement?
Andrew Sherman is an M&A Partner at Jones Day. He focuses his practice on issues affecting business growth for companies at all stages, including developing strategies to leverage intellectual property and technology assets, as well as international corporate transactional and franchising matters.
He has served as a legal and strategic advisor to dozens of Fortune 500 companies and hundreds of emerging growth companies. He has represented U.S. and international clients from early stage, rapidly growing start-ups, to closely held franchisors and middle market companies, to multibillion dollar international conglomerates. He also counsels on issues such as franchising, licensing, joint ventures, strategic alliances, capital formation, distribution channels, technology development, and mergers and acquisitions.Full Bio
Now there are other important issues such as price versus terms. I could agree to pay you $100 million for your company but if it’s $1 million a year for the next 100 years, that may not be acceptable to you, right? You’d like it to be $100 million in a lump sum. I’d like it to be $100 million over 100 years. So price versus terms, allocation or risks, these are the things most of the time is spent on. Everything else is usually a cousin of one of those two.
The last thing I would add is there’s a chunk in the agreement that just deals with all kinds of mechanics and logistics. You know, when do we close, conditions to closing, those are contentious but not nearly as contentious as the first two. If you had to break down the purchase agreement into three categories, it would be: allocation of risk, price and terms, and mechanics and logistics. Usually, it’s negotiated in exactly that order of the three buckets.