Legal - Acquire.com Academy

All right, we're going to talk about some fun stuff. So what to expect from the six legal stages of an acquisition. So there's obviously more stages, but these are the main ones that I have seen and have personally gone through myself. So to kick things off, the first one is a letter of intent. So this is really the first sign that a buyer is serious about potentially acquiring your startup. And really, with this, you might want to also include an NDA. Typically, NDAs are included or signed by a buyer prior to an loi, depending on the deal size. If it's, you know, under 100k or something like that, it could be okay to move forward with an LOI without an NDA first, just depending on how much information you're willing to disclose. But I highly recommend, number one, speaking to an M and A attorney, which you can find on Microacquire and really figuring out what is most appropriate as you're going through an acquisition. But typically, NDA first and then letter of intent is kind of the first serious piece of legal document that will include terms such as the purchase price, due diligence, what is the initial payment? Is there an exclusivity period? What are your transition like? There's so many details you can include in the letter of intent, but it's the first, you know, offer. Basically they're saying, we'd like to acquire a company and the next step would be due diligence. So letter of intent really just means, you know, this person is potentially interested in acquiring your company, so they made you a light offer. They're typically not legally binding, so once you sign it, it doesn't mean you're startup is sold. You still have to go through due diligence, you still have to sign a purchase agreement, you still have to receive the funds. So there's kind of a lot. And so the next step is due diligence, which is basically an audit of your company on steroids. So the buyer is going to go through everything from your metrics to your IP to your speak to your staff, potentially look at any debts. Like, it can be a very, very lengthy process. Some private equity firms and some buyers will move really, really quick. But typically it's not something that's fun. The due diligence I went through at Business Apps took, I believe we got it done in 90 days, but it took four people on my team. My CFO, VP of engineering, VP of product, eventually pulled in my chief success officer, and she was polling customer support requests. How many questions are being answered every week? How fast Are we answering them? What's our NPS score? What is our sales metrics look like? What was our, you know, last quarter's, you know, revenue goals and retention by a bunch of different cohorts. So it just depends on the business. Your business might be much simpler where, you know, but that can include everything, like your code base, all the tools that you use, if your team is staying on or not staying on. Talking about these things up front can have a massive impact on really aligning you and the buyer on. You know, my favorite question is, like, what does due diligence look like for you? If I'm going to sell my startup? You know, do you have a list of questions prepared in advance? Like, what do you want to go over? Do you need, like, what do you need up front? Typically, even before signing an loi? Like, what is your due diligence process? It's a very, very appropriate question. And then once you sign the loi, I highly recommend getting proper legal counsel in place, because you're signing the LOI with an expectation to sell your company and get acquired. And so you want to start, you know, having that team, especially on the legal side and even the tax side, to really help make sure that you maximize the sale, that everything goes through as agreed upon between you and the buyer. So I hope this is helpful and if you have any questions, just feel free to let me know. Forward in the acquisition, what are the terms? Is it cash up front? Is it seller financing? Is there equity involved? Whatever it may be, this will be worked into the purchase agreement. You also want to be aware of local laws. Sometimes there's local regulations that might halt or delay your sale, again, depending on the size of the business. Also, you gotta think about your shareholders. You know, what are you gonna pay for taxes? Do you have any debt on the business? And so clearing all that stuff up before you sell the business is usually required by a buyer. And then you're gonna move into transfer of ownership. So this is where you're transferring all the assets, everything that you essentially use to run your business. And you're gonna now be transitioning the business over to the new buyer so they can start running it. And so.