Sample Wait and See Buy Sell Agreement: Understanding the Basics
When it comes to buying and selling businesses, there are various legal agreements that need to be drafted and signed by both parties. One such agreement is the wait and see buy sell agreement, which is sometimes used when the buyer and seller are not able to agree on the valuation of the business.
As a copy editor who has worked with businesses in the past, I understand the importance of clear and concise language in legal agreements. In this article, I will break down the basics of a sample wait and see buy sell agreement and what it entails.
What is a Wait and See Buy Sell Agreement?
A wait and see buy sell agreement is a legal document that outlines the terms and conditions of a transaction between a buyer and seller of a business. Unlike a traditional buy-sell agreement, where the price of the business is determined at the time of purchase, a wait and see agreement allows for the price to be determined at a later date.
This type of agreement is useful when the buyer and seller cannot agree on the valuation of the business. Instead of abandoning the transaction, they can sign a wait and see agreement, which allows for the price to be determined once certain conditions are met.
How Does it Work?
In a wait and see agreement, the buyer and seller agree on a price range for the business. This range is typically based on a valuation methodology and can be influenced by various factors such as market conditions, financial performance, and the competitive landscape.
Once the range is agreed upon, the buyer and seller will set a trigger event that will determine the final price of the business. This trigger event can be a specific date, the sale of a particular product or service, or the achievement of a specific revenue target.
When the trigger event occurs, the final price of the business is determined based on the agreed-upon formula. For example, if the trigger event is the achievement of a specific revenue target, the final price may be a multiple of the revenue achieved.
Advantages and Disadvantages
The main advantage of a wait and see agreement is that it allows for flexibility in determining the price of the business. This can be useful when the buyer and seller have different opinions about the value of the business.
However, there are also disadvantages to this type of agreement. For one, the buyer and seller may not be in agreement on the trigger event or the formula for determining the final price. Additionally, if the trigger event is not achieved, the transaction may not move forward, resulting in wasted time and resources.
Conclusion
Overall, a wait and see buy sell agreement can be a useful tool for businesses that are not able to agree on the valuation of the business. However, it is important to carefully consider the trigger event and formula for determining the final price, as well as the potential risks and advantages of this type of agreement. As a professional, I believe that clear and concise language is essential in legal agreements like this one to ensure all parties understand the terms and conditions.