Attorney for Buying a Business: What a Buyer's M&A Attorney Actually Does

Stage 1: Before the LOI

Before you submit a letter of intent, an attorney should review the deal structure you are proposing, flag provisions that will create problems later, and advise on what terms matter most for your specific transaction type.

In an SBA 7(a) acquisition, this stage is particularly important. SBA has specific requirements that must be reflected in both the LOI and the purchase agreement. If the LOI commits to a deal structure that conflicts with SBA lender requirements, the buyer may have to renegotiate with the seller after the SBA commitment is issued. Sellers do not receive renegotiation requests well once the deal is under contract.

Before the LOI, an attorney reviews: purchase price relative to likely SBA appraisal value, seller financing structure and standby requirements, exclusivity period length, deposit amount and refund conditions, and due diligence scope. Use our business valuation tool to establish a defensible price range before the LOI conversation begins.

Stage 2: LOI Review and Drafting

If the seller's broker has provided an LOI template, the buyer should not sign it without counsel review. The broker represents the seller. The LOI template reflects the seller's interests, not the buyer's.

An M&A attorney either drafts the LOI from a buyer-favorable position or marks up the broker's template. The specific provisions that matter most:

• Exclusivity. The no-shop clause prevents the seller from marketing the business to other buyers during due diligence. Length and scope should match transaction complexity.
• Due diligence period. For a sub-$1M service business, 30 to 45 days is typically adequate. The attorney advises on what access is required and ensures the LOI specifies it.
• Deposit structure. Whether the deposit is refundable, under what conditions, and who holds it. A buyer who loses a deposit because of a provision they did not understand was protected by no one.
• Seller financing terms. If the deal involves a seller note, the LOI should specify the amount, interest rate, term, and standby requirements. Vague LOI language on seller financing creates disputes at the purchase agreement stage.
• Price adjustment mechanisms. Working capital adjustments, inventory counts, and customer contract conditions that can affect the final purchase price.

Our LOI generator can help you structure the initial terms before counsel review. Use it as a starting point, not a finished document.

Stage 3: Due Diligence Coordination

Due diligence is where deals are confirmed or unwound. An attorney's role in due diligence is to identify legal risks that are not visible in the financial statements.

For service businesses, the most important due diligence items are often intangible:

• Customer contract transferability. Many commercial service contracts contain anti-assignment clauses that require customer consent before the contract transfers to a new owner. A commercial cleaning company where 60% of revenue comes from contracts that cannot transfer without client approval is a fundamentally different asset than one where contracts transfer by operation of the assignment clause. This is a legal due diligence item, not a financial one. See the full checklist in our guide to buying a commercial cleaning business.
• Seller non-compete scope. The seller's non-compete is often the most important protective provision in a service business acquisition. If the seller can open a competing business next month and call every client, the buyer has purchased a revenue base with an expiration date. An attorney reviews whether the proposed non-compete is enforceable under the applicable state law, and whether the geographic and temporal scope is appropriate.
• UCC lien searches. UCC searches identify whether equipment, vehicles, or other assets have outstanding liens that must be satisfied at closing. A buyer who acquires assets subject to undisclosed liens inherits those obligations. In an asset purchase, the attorney conducts lien searches before closing.
• Employee classification. Service businesses often use 1099 contractors in ways that may not withstand IRS scrutiny. Misclassified employees are a liability that transfers with the business. An attorney identifies the exposure and negotiates a price adjustment or seller indemnification.
• Regulatory and licensing compliance. HVAC businesses require state contractor licenses. Pest control businesses require state pesticide applicator licenses and EPA compliance. The attorney identifies what licenses are required, whether they are current, and whether they transfer with the business or must be re-applied for by the new owner.

Stage 4: Purchase Agreement Drafting and Negotiation

The purchase agreement is the document that governs the transaction, defines what is being sold, and allocates risk between buyer and seller. For an SBA 7(a) transaction, the purchase agreement must satisfy four specific requirements that a general business attorney may not know:

Beyond SBA compliance, the purchase agreement negotiation covers representations and warranties, the indemnification structure (basket, cap, survival period), closing conditions, and non-compete scope. The M&A services overview describes how Acquisition Stars structures the purchase agreement engagement from LOI to closing.

Stage 5: Entity Formation and Structure

Most SBA buyers are individuals who have not previously owned a business. They need to form an entity before closing. SBA lenders prefer a new LLC acquiring the target's assets. The operating agreement for that LLC needs to satisfy the lender's requirements.

The entity formation decision also has tax implications the buyer should understand before closing. An LLC can elect S-corp status under the tax code. The S-corp election has a filing deadline relative to the entity formation date. A buyer who forms an LLC in December and does not understand the S-corp election window may miss it for the first year of ownership.

An attorney who advises on entity structure in the context of an SBA acquisition understands both the lender's requirements and the buyer's long-term tax position. These are not separate conversations.

Stage 6: Closing Coordination

An SBA 7(a) acquisition closing involves four parties: the lender, the SBA, the seller, and the buyer. The closing attorney coordinates all of them. The closing document package in an SBA deal is larger than in a conventional acquisition. If any party is missing a document, the closing cannot proceed.

The SBA commitment has an expiration date. If the closing is delayed past that date, the commitment may need to be re-issued, which takes time and creates cost. An attorney managing the closing process identifies all required documents in advance, coordinates collection from all parties, and ensures the closing proceeds on schedule. Use our acquisition financing calculator to model the loan structure before the closing date.

SBA deals close in 60 to 90 days from commitment. This is faster than many conventional M&A transactions. An attorney who works at conventional pace creates a timeline problem.