The Basics of a Business Acquisition: What Every Buyer Should Know

Acquiring a business is one of the most significant transactions you will undertake. The process involves several distinct stages, each with its own risks and requirements.

It typically begins with a Letter of Intent (LOI) — a non-binding document that outlines the key deal terms: purchase price, structure (asset sale vs. stock sale), and the timeline for closing. While non-binding, the LOI sets the tone and framework for everything that follows.

Due diligence is the most critical phase. This is where the buyer examines the target company's financial records, contracts, intellectual property, employee agreements, litigation history, and regulatory compliance. Thorough due diligence is your best protection against inheriting undisclosed liabilities.

The purchase agreement is the binding contract that governs the deal. It specifies what is being purchased, the price and payment terms, representations and warranties made by the seller, indemnification provisions, and closing conditions.

One of the most consequential choices is whether to structure the deal as an asset purchase or a stock purchase. Asset purchases are generally more buyer-friendly, allowing you to pick specific assets and leave liabilities behind. Stock purchases are simpler but mean you acquire the company as-is, including unknown liabilities.

Post-closing matters — transition services, non-compete agreements, and integration planning — are often underestimated in importance. A smooth transition is essential to preserving the value you paid for.

At Roitman Legal, we guide buyers through every stage of the acquisition process, from initial deal structuring through closing and post-closing integration.