July 20, 2016
There is an investment banking proverb which says: “You can name your price if I am allowed to name my terms.” The purchase price for a business can be paid in different forms allowing the buyer to save cash and share some of the risks of the business with the seller.
The most common is of course cash, but it's rare that 100% is paid up front. Typically 10-30% of a cash price is held in escrow to secure the indemnities the seller is willing to grant to support their representations and warranties in the sale and purchase agreement.
Next up is a seller note and IOU issued by the company or the buyer, promising to pay a fix, non-contingent purchase price amount to the seller upon repayment of other acquisition debt. Common is SBA financing deals.
Tune into the show to learn about the other 3 main forms purchase price takes in mergers and acquisition and business brokerage transactions.
Read the transcripts at http://entrepcoaches.com.
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