I am frequently involved with the purchase and/or sale of a business. Often the purchaser discovers the business through a business broker. In the Des Moines area, it seems as though several of the business brokers convince prospective buyers to make an offer before seeking legal advice or reviewing the basic terms before the offer is signed. (i.e. price, financing terms, earn-out, non-compete, etc.). The selling point is that the broker’s form offer to purchase makes the agreement contingent upon review by professionals including a lawyer and/or accountant.
While the contingency is a good one, the problem is that it does not replace a consultation with a lawyer or accountant before the offer is made. The simple reason is that once the offer is made it creates a binding agreement. If you fail to consult the lawyer before signing the offer the basic terms of the sale are complete. At that point, the lawyer may be able to help you with the legal wording in the final contract but it is awfully tough to change the terms of the deal.
So if you are purchasing a business be sure to consult a business lawyer before signing the offer. Don’t fall for the notion that a contingency permitting legal professionals to review the agreement will allow you to change the terms of deal in the final agreement. Once you sign the offer it is probably too late.