Business Purchase Agreement:
The Most Important Document in Your Deal

This is more than just a number. The purchase price section defines total consideration, how it's split between cash at closing, seller financing, earnouts, and escrow holdbacks. It should specify:

• • Cash at closing: Amount wire-transferred on closing day
• • Seller note: Amount financed by the seller, with interest rate, term, and security
• • Earnout: Contingent payments tied to post-closing performance (see our earnout guide)
• • Escrow holdback: Percentage held in escrow to cover potential indemnification claims (amount negotiated for the transaction)

In an asset deal, this section specifies every asset being purchased and every asset being excluded - typically through detailed schedules. In a stock deal, it identifies the shares or membership interests being transferred.

Identify included and excluded assets precisely. Reconcile the schedules with equipment, intellectual-property and contract records so a broad phrase such as "substantially all assets" leaves fewer ownership questions for closing. See asset purchase agreement guide.

Representations are factual statements each party makes about themselves and the business. Warranties are promises that those facts are true. Together, they create the legal basis for indemnification claims after closing.

Seller representations can address organization, authority, financial records, taxes, intellectual property, compliance and disputes. Buyers also make representations appropriate to their obligations. Identify which representations receive special treatment under the actual cap, survival and remedy provisions. See fundamental representations.

The negotiation here is about scope and qualifiers. Sellers want to narrow their reps with "to the best of our knowledge" and "in all material respects." Buyers want unqualified, sweeping representations. The compromise shapes your entire post-closing risk profile. We go deep on this in our representations and warranties guide.

Indemnification is one part of the negotiated remedy framework. Review its caps, baskets, survival periods and exclusions alongside any exclusive-remedy clause, other contractual rights and applicable law. Confirm which remedies remain available under this agreement and its governing law.

The three numbers that matter most:

Closing conditions are the gates that must open before the deal can close. They protect both sides from being forced to close when circumstances have changed. Standard conditions include:

• • Accuracy of representations and warranties at closing (not just at signing)
• • No material adverse change in the business between signing and closing
• • Required regulatory approvals (Hart-Scott-Rodino for larger deals)
• • Third-party consents (landlord, key customers, lenders)
• • Buyer financing confirmation
• • Key employee agreements executed

A proposed seller covenant addresses competitive activity after closing. A non-solicitation clause addresses defined approaches to customers, employees or other relationships. Review each party bound, restricted conduct, duration, territory and applicable law before relying on either protection.

Review the restricted activity, geography, duration and persons bound under the applicable law. Sale-related restrictions and employment restrictions can require separate analysis, even when the seller continues working after closing.

The buyer needs to identify the goodwill and relationships being acquired. The seller needs to understand how the draft affects future work and retained business interests. Define those activities before asking counsel to assess enforceability and negotiate permitted exceptions.

An earnout bridges the gap when buyer and seller disagree on what the business is worth. The seller receives additional payments after closing if the business hits agreed-upon targets - revenue, EBITDA, customer retention, or other metrics.

Earnouts are one of the most contentious post-closing issues in M&A. The critical questions:

• • Who controls the business operations that drive earnout metrics?
• • What accounting methodology applies?
• • Can the buyer make changes that tank the earnout metrics?
• • What dispute resolution mechanism applies?

Earnout terms deserve careful review because payment depends on the agreed metrics, operating obligations and dispute process. Read our full earnout agreements guide before agreeing to any performance-based payment structure.

Working capital is the lifeblood that keeps the business operating day-to-day - current assets minus current liabilities. The purchase agreement should specify a "target" working capital amount, and the purchase price adjusts dollar-for-dollar based on the actual working capital delivered at closing.

Compare the expected operating assets and liabilities at closing with the price assumptions. Agree which accounts enter the working-capital calculation, the target, accounting principles and objection process. A price adjustment and an operating covenant serve different purposes; review both with counsel and the accountant. See the working capital adjustment guide for the calculation and true-up questions.

An escrow can hold an agreed amount with a third party to support specified post-closing obligations. Define the permitted claims, notice process, release instructions and disputed-amount treatment in documents that align with the purchase agreement.

Negotiate the escrow amount, release schedule (lump sum vs. staged), conditions for release, and what happens to remaining escrow after the survival period expires. Sellers want the smallest escrow possible with the fastest release. Buyers want a larger escrow held for the full survival period.

A transition services agreement (TSA) defines any operational support after closing, such as introductions, training, systems access and vendor handoffs. Identify the provider, services, duration, compensation and exit plan so the business can operate through the transition.

Define the proposed transition services, who provides them, their duration, any payment and the agreed response to nonperformance. Coordinate the purchase agreement with any separate transition-services document.

Both parties have learned extensive confidential information about each other during due diligence. The confidentiality section survives closing and prevents either side from disclosing deal terms, proprietary business information, or trade secrets. If the deal falls apart before closing, confidentiality provisions protect the seller's sensitive information from being used by the buyer (who may be a competitor or investor in one).

The dispute-resolution provisions specify how disagreements will be addressed, including any negotiation, mediation, arbitration or litigation steps. Check governing law, venue, notice requirements, interim relief and responsibility for costs.

Compare forum, confidentiality, discovery, appeal rights, urgency and cost under the actual dispute clause and applicable rules. Counsel should explain whether negotiation or mediation is required before another proceeding and what interim relief remains available. Resolve those choices before signing rather than assuming one process is always faster or more suitable. This same framework applies to business divorce buyouts where partner disputes are resolved through structured purchase agreements.