Commercial Service Business Contracts

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by a searcher from Gettysburg College
in La Jolla Shores Beach, San Diego, CA 92037, USA

1yr ago

Commercial Service Business Contracts

Buyers/Sellers of Commercial Service Businesses:

My commercial cleaning company holds numerous accounts through management companies (e.g. Greystar). We've encountered situations where some of these management companies will only work with you if you sign their contract. If you were considering purchasing a commercial cleaning company and discovered that 20% of it's business was in contracts dictated by management companies, how would this impact your decision?

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reply by a searcher 1yr ago
from Gettysburg College in La Jolla Shores Beach, San Diego, CA 92037, USA

That's a great point, Brad. That would be a primary concern for us regarding this topic. In our contracts we have a transfer of ownership clause. To be fair, we haven't requested that a clause such as a T.O.O. be put into any of the external contracts from these management companies, so that is our mistake, as we should have been asking to include that it. Sent you a DM.

reply by a lender 1yr ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

When you buy any business you want to look at the standard contracts. If some of them are provided by third parties, then you need to take a particularly close look at those. Some have clauses that prevent assignment or require approval if assigned. Others might even require a notice upon a sale even though no approval is necessary. Depending on what you find in the contracts and how many there are you can do the following:
1) Require in the LOI that the contracts are assigned or the assignment is approved at or prior to closing.
2) Due a stock sale if that does not trigger anything in the contracts. However, you could incur other liabilities with a stock sale you would need to talk through with your attorney and accountant.

I hope this helps. Good luck.