North Sydney Commercial Lawyers

Why is “time of the essence” in a business sale?Print This Post

Why is “time of the essence” in a business sale? From the seller’s perspective, speed is imperative because generally,

  1. The longer the transaction continues, the higher will be the adviser’s fees;
  2. The sale causes distraction for management and the company’s direction and focus can be lost during a protracted sale process;
  3. An extended sale process can send a signal to the market that there is difficulty in selling the target assets and may have implications for the share price of a listed entity;
  4. Delays in completing a sale can create continuous disclosure issues for an ASX listed vendor. This can result in the listed vendor being obliged to issue inconclusive market updates on the sale process which feeds the perceptions mentioned in “3” above;
  5. Well advised purchasers are aware of these issues. The purchaser may ask for a discount off the asking price and possibly onerous indemnities, warranties, price hold-backs and other legal protections in the sale agreement.

Make sure your lawyer is not slowing up the process!

Click here for the Autumn 2014 Business Succession Newsletter