In the early stages of the acquisition process, a trusted legal adviser can play a vital role not only in helping companies evaluate the various aspects of the offer but also in facilitating the relationship between the seller and the prospective buyer, says Toronto corporate lawyer Chaim Sapirman.

In terms of first steps, explains Sapirman, partner with Torkin Manes LLP. a lawyer can work with clients to evaluate the structure of the transaction itself, such as whether the deal will be a share sale, an asset sale, a straight buyout, amalgamation/merger, or other type of arrangement done.

“Each one has its own pros and cons with its own set of tax considerations and consequences as well as implications for the operations of the business. The steps that have to be taken to complete a particular transaction will differ depending on the nature of the structure,” he tells

Lawyers will also help the seller understand the scope of specific obligations that are going to be part of the transaction itself as well as any potential ongoing responsibilities or liabilities after the deal is completed.

Part of this, says Sapirman, involves giving the seller a sense of the legal parameters that will serve to value an offer — such as how and when the purchase price is going to be paid, the scope of the covenants contained in the agreements, the types of indemnification clauses the purchaser is requesting, et cetera.

For example, he says, will the purchaser be looking to hold back part of the purchase price at closing, whether in an escrow or as an earn-out that the seller will have to work to earn after closing, or is the purchaser willing to pay it all up front?

“All of those factors go into determining the value of an offer from a legal perspective and sometimes a seller may be willing to take a lower purchase price, with all of the cash paid up front, than accept a higher purchase price where it’s either paid out over time or will be paid based on the results of an earn-out formula.”

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