Properly negotiating and structuring a purchase or sale of a business can be a challenging endeavor.  Having a good team of accountants, legal advisers, valuation experts, tax advisers, lenders or investors is crucial to successfully buying or selling a business.   There are a variety of considerations in buying or selling a business, but there are two major ways to structure a deal: an asset purchase or a stock purchase. 

An advantage of an asset purchase is that it allows the buyer to be selective in terms of the assets that it wants to acquire from the target company.  Also, the buyer is generally not liable for the seller’s liabilities, unless the asset purchase agreement has such language.  Some disadvantages of an asset purchase are that the bill of sale must be comprehensive enough to ensure that no key assets are overlooked and third party consents will likely be required.  

Some advantages of a stock purchase are that the business identity, licenses, permits can be preserved, and continuity of the business may be maintained.   However, the buyer may be liable for unknown or contingent liabilities, and may be forced to contend with the seller’s minority shareholders. 

 Also, there are variety of employment and intellectual property law considerations that go into structuring a proper purchase or sale of a business. Such as the following:

 a) negotiating key employee agreements and non-competition restrictions;

 b) contending with collective bargaining agreements;

 c) resolving anticipated or outstanding claims by employees;

 d) acquiring the desired intellectual property (business name or marks, copyrights, patents or trade secrets);

 e) restricting the other party from using the intellectual property (business name or marks, copyrights, patents or trade secrets); and    

 f) recording assignments or transfers of intellectual property (business name or marks, copyrights, patents or trade secrets). 

Properly, structuring a purchase or sale of a business can often mean the success or failure of the venture.  If you have any concerns or questions regarding the purchase or sale of a business, then please feel free to contact us.

Plaintiff was acquired by a new company and sued the defendant on a breach of contract theory in an American Arbitration Association (“AAA”) Complaint.  The AAA Complaint alleged breach of a written agreement; however, Defendant counterclaimed requesting reformation or rescission of the contract from the arbitrator.  The Defendant asserted a mutual mistake of fact as the basis for seeking a reformation remedy, and alternatively sought rescission of the contract.

In the arbitration proceeding, the Plaintiff asserted that reformation was not necessary as there was no mutual mistake of fact and no scrivener’s error.  However, Plaintiff did not argue that an arbitrator could not reform a contract.  Subsequently, Plaintiff filed a motion with the trial court to vacate the arbitration award asserting that the arbitrator lacked the authority to reform the 2004 written contract. 

The trial court held that Plaintiff’s failure to assert at arbitration that the Arbitrator lacked the authority to reform the contract was a waiver of the argument.  The trial court held that to object to arbitration, a party must object to the arbitration proceeding in a timely manner.  The appellate court affirmed and stated that there is a mandate by the Illinois Supreme Court that arbitration awards should be construed as to uphold their validity whenever possible. 

The presumption is that an arbitrator did not exceed his or her authority, and grant a petition to vacate an arbitration award only in extraordinary circumstances.  Judicial review of an arbitration award is extremely limited.  Consequently, litigators must be more cognizant and advise their clients of the need to assert all claims and arguments in arbitration proceedings.    

See: First Health Group v. Ruddick, N0 1-083236; 2009 WL 1940702 (1st Dist). First Health Group Corp_Arbitration.