Many clients have the same concerns when reviewing the legal terms of an asset purchase agreement. Understanding these concerns can help you avoid future disputes and ensure the parties come to a fair and balanced agreement.
This article outlines the top concerns clients have about asset purchase agreement, based on real project data on ContractsCounsel, when connecting with an experienced business lawyer for contract review and negotiation services.
Note: this analysis comes from thousands of asset purchase agreement review postings on the ContractsCounsel platform.
| Concern | Why It Matters | How Lawyers Help |
| Indemnification | Defines who covers post-closing liabilities. | Lawyers balance risk and set fair survival periods. |
| Contract Transfers | Missing assignments can delay operations. | Lawyers verify transfer rights and secure approvals. |
| Inventory & Receivables | Disputes arise over valuation and collections. | Lawyers outline clear valuation and collection terms. |
| Jurisdiction & Governing Law | Multi-state deals need clear legal rules. | Lawyers select proper law and venue to reduce risk. |
| Financing & Payment Terms | Complex payments can cause disputes. | Lawyers structure schedules, collateral, and guarantees. |
| Due Diligence | Buyers need info; sellers want privacy. | Lawyers set fair procedures and confidentiality rules. |
| Escrow & Holdbacks | Protects parties from post-closing claims. | Lawyers define terms, timing, and release conditions. |
| Post-closing Support | Buyers often need seller help after closing. | Lawyers document obligations and timelines clearly. |
Indemnification and Legal Safeguards
Concern 1: Buyers and sellers share the same concern: who bears responsibility for liabilities that can arise after closing? Buyers will want protection from pre-existing debts, while sellers want limits on any post-closing claims. This is a highly common situation that needs to be addressed.
How lawyers help: Attorneys draft indemnification provisions that allocate liability fairly, define survival periods, and ensure neither party is exposed to unintended future claims. This serves to protect all parties from potential risks and liabilities.
Transferring Contracts, Leases, and Licenses
Concern 2: Key contracts, leases, and licenses should be legally transferred during a sale for a smooth handover. However, if these are not properly assigned and outlined in the paperwork, there could be issues or delays. Businesses want to continue operating without a hitch, so the APA needs to include these clauses.
How lawyers help: Lawyers verify which assets can legally be assigned, so everything is outlined clearly. Once they do this, they can secure required third-party consents if required and draft assignment language to ensure a smooth transfer of operations for everyone involved.
Inventory and Receivables
Concern 3: It’s impossible to make provision for all types of disputes that could arise in the future. But, in Asset Purchase Agreements, it's common to see disputes arising over how inventory is valued and how accounts receivable (or money business is owed by customers) are collected or allocated after a sale.
How lawyers help: Attorneys make sure that there's a fair and clear inventory process. They might specify processes for handling inventory and collecting receivables so that there are no misunderstandings.
Jurisdiction and Law Clauses
Concern 4: A situation that can make the APA more complicated is if buyers and sellers are operating across different states or even countries. They need to know what laws rule the agreement and in which city/state the disputes will be resolved. You want all of these details to be outlined early on so that processes are clear and smooth should they arise.
How lawyers help: Lawyers select the most appropriate law and jurisdiction clauses. These have to be aligned with the locations of both parties, and the agreement should include clauses to minimize the parties' risks.
Financing and Payment Terms
Concern 5: Buyers might want to pay over time or with the use of financing. This can make the situation more complex as both parties require clarity and security. Committing to agreed-upon payment schedules is essential to avoid future disputes or financial losses.
How lawyers help: When drawing up an APA, attorneys will draft all the necessary payment schedules that both sides must respect. They'll also review the financing terms and include guarantees or collateral to guide the agreement.
Due Diligence Scope and Obligations
Concern 6: Buyers want to have all the information they need about the business before they purchase, while sellers might not want to feel exposed. This requires a fine dance between the two so that they both get what they want.
How lawyers help: Lawyers can assist both parties by outlining due diligence procedures, confidentiality obligations, and proposed timelines.
Escrow Arrangements and Holdbacks
Concern 7: In some cases, buyers will request escrow or holdback arrangements to cover potential post-closing adjustments. Escrow means that money or assets are held back by a neutral party who releases it/them at a later stage, while holdback refers to the seller holding back some of the payment to cover claims or unfinished work.
How lawyers help: Attorneys conduct important activities to assist all parties involved. They'll detail escrow and holdback arrangements, so everyone is on board, while also providing protections for both parties.
Post-closing Assistance
Concern 8: When the APA closes, it doesn't always mean that the business relationship ends with it. In fact, it's common for buyers to need help from the seller during the transition process. This could take the form of training or the use of other operations to help them make a smooth exit.
How lawyers help: Lawyers will document transition support obligations so that sellers and buyers know exactly what's expected of them. Whatever support the seller will provide must be written in the agreement.
Key Takeaways
Clients mostly worry about potential issues such as invalid payment terms, inventory evaluation, or post-closing transitions. These are just some of the valid concerns they could have, resulting in them wanting to reach out to a lawyer who can draft a compliant APA that protects them.
If you want help drafting your APA, ContractsCounsel can assist. On this platform, buyers and sellers post projects for free and connect with business lawyers to help them review and draft Asset Purchase Agreements, keeping them fair, legal, and clear.
