New York businesses sometimes purchase the controlling shares of other companies. Even in its most basic form, this type of corporate action can be complex and may cause legal complications. Acquisitions are often initiated when a company that is facing dire financial issues decides to allow another corporation to take control.
There are several common mistakes that business owners preparing for acquisitions ought to avoid. The first is to insist upon a confidential agreement, otherwise known as a nondisclosure contract. A contract like this protects the seller from having critical details of the transaction exposed, which can place a business at a great disadvantage, especially if the acquisition deal falls through.
Letters of intent
It is a mistake for buyers not to sign a letter of intent when seeking to take control of another company’s assets. A letter of intent is similar to earnest money in a real estate transaction. It formally expresses a buyer’s interest and includes purchase conditions and price.
Finally, sellers can protect their interests during acquisitions by vetting potential buyers to ensure that they are qualified to make the deal. If a seller discloses sensitive financial information to a buyer who winds up not being qualified to purchase controlling shares of the company, it can have negative consequences. Avoiding these mistakes helps acquisitions run more smoothly; however, it is always best to have experienced legal support on hand in case problems arise.