This is Part Four in a series discussing steps in a business
transaction. In Parts One, Two, and
Three, I discussed term sheets, definitive agreements, and financing. In this part, I’ll discuss regulatory and
third party approvals.
Sometimes, approval from a third party is required before
you can complete your transaction. For
example, if you are purchasing or selling a franchise business, the approval of
the franchisor is required before the franchise unit can be transferred.
In some circumstances, a governmental approval may be
required for your transaction. For example, transferring properties regulated
by the Federal Communications Commission (FCC) such as a radio station,
television station, or cellular phone system requires submitting an application
to and receiving the approval of the FCC.
If the transaction involves the sale of a business with one
or more ongoing significant customer or vendor accounts, the buyer may want
assurances that the accounts can and will continue after the transfer. In this case, continuation depends upon what
the agreement between the seller and the account says with respect to
assignment. Some customer and vendor account agreements state that the account
may be assigned, some allow assignment with notice, some forbid assignment
without consent of the vendor or customer; other account agreements are
completely silent on the issue.
Delivery of these consents is generally one of the conditions
to closing of the transaction.
Comments