Can a Purchase Contract to buy a company be assignable?
August 17, 2023
by a searcher in Rindge, NH 03461, USA
Crazy question: Can the purchase contract to buy an existing company be assignable?
In real estate, the purchase contract can have a clause to make it permissible for the buyer to assign the contract to someone else who will assume the purchase under the same terms. (and in many cases the second buyer will pay the first buyer a fee) Can that be done in business acquisitions?
I realize buying a business is not the same as buying a house, but I can imagine situations where it might be necessary and/or beneficial to assign the contract to someone else.
I don't mean to a legal holding company that I control, I mean like 'assign' the contract (aka 'sell the deal') to another buyer, like a PE firm or other buyer.
I am coming across some deals that are very good deals but I might not want to buy them myself. Could I get them under agreement, then find another buyer to make the transaction...and get paid some $ of course.
Has anyone done this? Heard of it? Like the idea?
from The University of Chicago in Chicago, IL, USA
2) Purchase contract, signed but not closed: You will not be able to close w/o changing the buyer's name. This will require seller involvement, R&W by both sides may have to be redone. If there is a lender, you will have to re-start that cycle. Further, a small company seller will not close if the jockey changes.
3) Purchase contract, signed and closed: Now you own the business and are selling. Buyer will have to negotiate with you the same way you did with the seller.
4) I sold (a healthcare business) X1 to Y and Y sold to Z on the same day. Y owned 3 (X2, X3 and X4). He had negotiated 10 more, X5 to X14. All 11 LOI's (X1 and X5 to.X14) were signed by Y. X1 was the largest of all 14. Z was involved from day one. All DD and purchase contracts were negotiated by Z. So, technically, Z bought all 14 businesses on same day. There was no fee paid by Z to Y. The CEO of Y (an attorney who owned 3 companies) became the CEO of 14 companies. He had proven himself with all aspects on acquisitions and executions. In 5 years, Z exited with 30,000 x of original purchase price of the 14 companies.
In summary, I do not think you can do what is proposed. If seller has a good attorney, such assignment will be precluded. If not, seller will find ways to go past exclusivity period. Having said, all this, PE buyer does that every day. Except, they take 5 to 10 years to flip.
from Allahabad University in Austin, TX, USA