As a Seller, Here’s How You Should Negotiate the Critical Purchase and Sale Agreement

First, we recommend you volunteer to the buyer that your lawyer prepare the first Purchase and Sale Agreement draft. A lot of sellers will see the preparation of the first draft as an expense, rather than as a strategic advantage. In our experience, having your lawyer prepare the first draft saves time and money in the overall process.

We recommend you huddle with your lawyer and review each of the provisions of the PSA and strategize about what you will effectively demand as part of that first draft. You will never end up with all your demands being met, but we think you end up in a better position than if the buyer takes the lead in documentation.

In terms of staffing the task of negotiating the PSA, traditional practice has been that the businesspeople (i.e., seller and buyer) negotiate business terms (e.g., price) and lawyers negotiate legal terms (e.g., reps and warranties). And then what happens is the most critical legal issues are often not settled by the lawyers, and they become terms for the businesspeople to negotiate. As you can imagine, we recommend working very closely with your lawyer through this process.

GROW and SELL Advisors, wholly-owned by Traversi & Co., LLC, is a premier sell-side M&A advisory firm – a boutique investment bank – serving the lower middle market.  Visit us here.

For a short video clip on this topic, click here.