From Search to Purchase: Navigating Legal Dos and Don’ts of Entrepreneurship Through Acquisition

5 Key Strategies for Successful Business Acquisition:

1. Engage Legal Counsel Early: Connect with specialized Mergers and Acquisitions (M&A) lawyers before you even start searching. This allows them to keep an eye out for opportunities that match your criteria and provide valuable connections to lenders, equity partners, and brokers.
2. Accept That No Deal Is Perfect: Every business acquisition has issues or “hair” on it. The key is determining which issues you can live with and which are deal-breakers. Understanding this reality helps set proper expectations from the start.
3. Conduct Comprehensive Due Diligence: Use legal counsel to uncover potential liabilities through public record searches and contract reviews. Remember that sellers present favourable views of their business, and your legal team serves as the necessary counterbalance to verify claims about litigation, employee issues, and customer relationships.
4. Balance Speed With Caution in Letters of Intent (LOIs): Move quickly enough to remain competitive (within 5 days of receiving a Confidential Information Memorandum), but don’t make offers you intend to walk away from later. Find that 80-90% confidence interval before submitting an LOI.
5. Give Proper Attention to Purchase Agreements: Don’t treat purchase agreements as standardized templates. Remember that shorter agreements typically favour sellers, while longer, more detailed agreements protect buyers. This document may be crucial if disputes arise later.

Show Notes:
[00:00:40] Key legal considerations for searchers starting their ETA journey.
[00:01:56] When to engage legal counsel in the deal process.
[00:04:23] How lawyers facilitate deals and connections.
[00:07:53] Why first-time business acquisition is high stakes.
[00:09:42] Why Josh focuses on ETA.
[00:12:25] The role of legal counsel in the due diligence process.
[00:15:45] Asset purchase vs. share purchase in Canada vs. the US.
[00:19:10] Common legal issues uncovered during due diligence.
[00:22:52] The “wild west” of lower middle market businesses.
[00:26:55] Why legal review of Letters of Intent (LOIs) is crucial before signing.
[00:32:24] Balancing competitive offers with due diligence needs.
[00:34:45] Why bully offers typically don’t work for searchers.
[00:36:35] Common pitfalls in share purchase agreement negotiations.
[00:37:33] Why longer agreements favour buyers, shorter favour sellers.