I hope the cheesy photo grabbed your attention because overlooking key legal aspects of an M&A deal can lead to delays, disputes, or even derail the deal entirely. Here’s a breakdown of the most important legal considerations:
🧾 1. Business Structure and Ownership
- Entity type (LLC, corporation, sole proprietorship) affects how the sale is structured—asset sale vs. stock/membership interest sale.
- Confirm ownership rights and ensure all stakeholders (partners, shareholders, members) are aligned and legally authorized to sell.
📑 2. Due Diligence Preparation
- Buyers will scrutinize your business. Be ready with:
- Financial statements and tax returns
- Contracts (leases, vendor agreements, customer deals)
- Employment records and IP documentation
- Licenses, permits, and compliance records
- Clean up any legal or regulatory issues in advance to avoid red flags.
📜 3. Contracts and Assignability
- Review all contracts for assignability clauses—some agreements may require third-party consent to transfer.
- This includes leases, supplier agreements, and customer contracts.
🧠 4. Intellectual Property (IP)
- Ensure trademarks, copyrights, patents, and trade secrets are:
- Properly registered
- Owned by the business (not individuals)
- Transferable to the buyer
👥 5. Employee and Labor Considerations
- Determine whether employees will be retained or terminated.
- Review employment contracts, benefits, and any union agreements.
- Comply with notification laws and severance obligations if applicable.
🧾 6. Regulatory Compliance
- Confirm that the business complies with all local, state, and federal regulations.
- Resolve any outstanding tax liabilities, environmental issues, or licensing gaps.
💼 7. Non-Disclosure and Confidentiality Agreements
- Use NDAs to protect sensitive business information during negotiations.
- This helps prevent leaks that could unsettle employees, customers, or competitors.
🧾 8. Purchase Agreement Terms
- The definitive agreement should include:
- Purchase price and payment terms
- Representations and warranties
- Indemnification clauses
- Non-compete and non-solicitation provisions
- Closing conditions and post-closing obligations4
💰 9. Tax Implications
- Asset vs. stock sale has different tax consequences for both buyer and seller.
- Work with a tax advisor to structure the deal in a tax-efficient way and avoid surprises.
🧷 10. Post-Sale Liabilities
- Clearly define what liabilities (debts, lawsuits, warranties) transfer to the buyer.
- Consider using escrow accounts or holdbacks to cover potential post-closing claims
While each of these points appear to be obvious, they should never be overlooked.
David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, and other issues. In particular, he has a significant amount of experience in hospitality law by representing third party management companies, owners, and developers.
He can be reached at david@seidmanlawgroup.com or 312-399-7390.
This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.
Photo Credit: Getting Things Right
