Startup Funding Espresso – Legal Issues in an Acquisition

Legal issues in an acquisition

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

There are several legal issues involved in selling your business. 

Here is a list of key areas to review:

Liability -- the buyer assumes the liabilities of the acquired.

This includes any outstanding litigation as well as compliance issues.

Intellectual property -- the buyer will look for what has been filed, when, and what is the current status.

Make sure your documents and filings are in order. 

Escrow for liabilities -- the buyer may want to hold some of the funds in escrow for potential liabilities that may come in the first year.

Review your outstanding liabilities and working capital requirements.

Contracts -- the legal team will want to review all contracts to understand what responsibilities the acquired has.

Make sure all contracts are organized for review.

Investor agreements -- the legal team will review all investment documents to understand what legal requirements must be met.

Non-compete and non-disclosure agreements -- the buyer will require the founding team to sign non-compete and nondisclosure agreements to protect the business from additional competition.

Have your legal team review these areas before an acquisition.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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