YAHNIAN LAW CORPORATION has represented a substantial number of persons and entities in the sale and purchase of business assets, corporate stock, LLC, and Partnership interests. This includes but is not limited to, professional practices such as Physicians, Dentists, Lawyers, CPAs, and others.
As an Attorney and a CPA, with a CFP, an LLM in Taxation (NYU) and a Certificate in Taxation (UCLA), Steve Yahnian is particularly suited for and experienced in the representation of Sellers and Buyers of businesses and professional practices. In particular, Mr. Yahnian specializes in the sales and purchases of closely held businesses and professional practices.
As you can imagine there are wide array of legal, tax and accounting issues when business sellers and buyers negotiate. Sometimes the sale and purchase of a corporate business or corporate stock, where two or more corporations are involved, which either combine into one corporation, or where one acquires the stock or assets of the other, is classified as a ‘merger and acquisition’.
Representing buyers, sellers, lenders and management, Yahnian Law Corporation provides advice, counseling, design and drafting with respect to the following:
2. The primary methods of selling a business
Outlined below are the most common methods used for selling a business.
3. Legal Considerations
Some legal considerations when buying or selling a business are the following.
Buying or selling a business can create some unique legal challenges to everyone involved. An M&A transaction that is not properly structured from a legal standpoint can create serious business, legal, accounting and tax problems for everyone down the road. Here are some important legal considerations:
•Make sure you hire an M&A attorney: This may sound obvious coming from an attorney who practices in this area, but without one, the likelihood that you will miss an important legal consideration in your deal increases significantly. An attorney with M&A experience helps you properly document the transaction, makes sure that ongoing liabilities and obligations are properly defined, and helps you move towards a smooth closing.
•Use a purchase agreement: Do not simply sign / accept a bill of sale and be done with the deal. Make sure you have a properly prepared definitive agreement between buyer and seller that clearly sets forth what is being transferred and what liabilities and obligations each party is assuming/undertaking. Among other things, a good agreement will also set forth appropriate representations, warranties and indemnity promises.
•Conduct thorough due diligence: This is particularly important for the buyer. A buyer needs to know all the details of the business they are buying – including whether of not the assets of the business are coming to them free and clear of liens.
4. Other Practical Considerations
Some practical considerations when buying or selling a business include the following:
In addition to the legal advice and services I provide, I try to help clients consider the other aspects of buying or selling a business. Below is a short list of the things I share with business owners to help them comprehend the process of selling a business from a practical point of view.
5. Basic Matters
The purchase or sale of a closely held business is a complex transaction. It is one which requires a great deal of skill and knowledge in matters of law, tax, accounting, and negotiation. Generally these skills are not all found in one individual. Often the owner will be knowledgeable about the operations of the business, but lack the experience and skills needed to buy or sell an enterprise. For many owners, buying or selling a business is a once in a lifetime ordeal.
Buying or selling a business is a very significant transaction to the parties. For the seller, it can determine the size of his estate, have a material impact on retirement wealth, and provide funds for investing in new ventures. For the buyer, the purchase can mean the difference between success and failure and between wealth and financial ruin.
With so much at stake in a business purchase, it is important for the buyer and the seller to approach the transaction in an informed manner and to assemble a team of experts to provide the knowledge and tools needed to achieve a successful transaction. With that in mind, the following discussion is to give the buyer and seller and members of the selling and buying side a transactional, “hands on,” framework for identifying and analyzing the considerations and concerns which should be examined in both buying and selling a closely held business. Primary focus of the following is on transactions involving the sale or purchase of closely held businesses, which is a particular area of expertise and focus of YAHNIAN LAW CORPORATION.
The terms “merger” and “acquisition” are commonly used interchangeably in the business community. To an attorney, however, a “merger” is the statutory process of combining the acquired corporation into the acquiring corporation, often referred to as a “statutory merger” Unless the context otherwise clearly indicates, the word “merger” is used in that sense throughout this discussion.
Despite any differences in terminology, the substantive result of either a merger or acquisition is the same: one corporation obtains ownership of another corporation.
b. Five Basic Acquisition Methods
One corporation can obtain ownership of another corporation by any of the following methods:
•The purchase of all the outstanding shares of one corporation by another corporation for cash or promissory notes
•The purchase of all assets of one corporation by another corporation for cash or promissory notes
•The statutory merger of corporations
•The exchange of all shares of one corporation for shares of the other, acquiring, corporation
•The exchange of all assets of one corporation for shares of another corporation
6. Legal Considerations in the Purchase and Sale of a Business
Parties to the purchase and sale of a business must contemplate a variety of legal issues including, but not limited to, the following:
If the transaction includes a transfer of employees, then labor and employment issues might arise. However, there should be no issue concerning the statutory duty to warn the employees and various government officials about a mass layoff [see generally Lab. Code § 1400 et seq. (Worker Adjustment and Retraining Notification Act, or WARN Act); see also 29 U.S.C. § 2101 et seq. (equivalent federal law applicable to larger employers)], even if the threshold number of 50 employees were transferred, because there would be no mass layoff under the statute. The WARN Act defines a mass layoff in terms of employees losing their positions with the employer [Lab. Code § 1400(c), (d)], whereas in the case of a business transfer that includes existing employees, the employees would merely be exchanging the former employer for a new employer. There would be no duty under the WARN Act even if not all of the existing employees were transferred, as long as fewer than 50 were laid off in the process [MacIsaac v. Waste Management Collection & Recycling, Inc. (2005) 134 Cal. App. 4th 1076, 1086–1087, 36 Cal. Rptr. 3d 650].
7. Forms of Mergers and Acquisitions
Mergers and acquisitions (M&A) are two distinct forms of business transactions that both result in the consolidation of two companies into one. Completing a merger or acquiring another business is a major event for any company. Those type of transactions often have dramatic implications for all parties — owners, management, employees, and customers.
Understandably, the early stages of exploring a potential merger or acquisition may require legal preparation. For example, seller, buyer or both may consider entering into a confidentiality and non-circumvent agreement at the early stages of exploring a transaction.
If you are a seller in the transaction, a business broker engagement agreement will set out terms for your exclusive representation. It is usually a good idea to have your attorney review and suggest modification of the Broker agreement before retaining the business broker to market your business.
A merger occurs when two or more separate companies combine to form a single company. There are five common types of mergers:
A merger of equals is a merger of two or more companies where there is no designated acquiring company. Rather, the combined companies will have equal or close to equal board representation on the new board. Stockholders of each company surrender their shares and receive shares from the new company.
A true merger of equals is relatively rare. Usually one company is actually acquiring another, but out of deference to management and employees or as a marketing tactic, the companies will refer to it as a merger instead of an acquisition.
An acquisition is the purchase of one company (the target) by another company (the acquirer). Acquisitions can occur through the purchase of the stock or other equity interests of the target company or through the purchase of all or a substantial amount of the target company’s assets.
10. Mergers and Acquisitions Resources and Considerations
Both mergers and acquisitions are complex transactions that require significant strategic business planning and legal due diligence. An experienced mergers and acquisitions lawyer can help guide you through the various legal areas that govern M&A law.
Some important legal considerations include:
Mergers and acquisitions involve purchasing or merging with another company. Handling mergers and acquisitions matters requires not only a thorough understanding of the law but expertise in business matters as well. Mr. Yahnian has years of experience in business law, real estate law, tax law, intellectual property law, and other areas of law that arise in business sales and purchases.
11. Mergers & Acquisitions Legal Services
YAHNIAN LAW CORPORATIN provides a number of legal services related to mergers and acquisitions, including:
12. Benefits of Our Mergers & Acquisition Legal Services
For any business considering a merger or acquisition, legal representation is critical to making sure that the transaction complies with all applicable laws and is structured in the most advantageous manner. YAHNIAN LAW CORPORATION has extensive experience handling all types of mergers and acquisitions, and can guide and advise clients through the process.