Purchasing a business, like most significant transactions, can range in price quite a bit based on a number of factors. For purposes of this estimate, let's assume a somewhat straight-forward asset purchase for $3 million with no assumption of any out-of-the-ordinary liabilities. These types of transactions can be broken down into various stages:
- Letter of Intent - Attorneys may or may not be involved at this stage, although it probably makes sense to at least have an attorney review an LOI prior to signature. To draft and take an LOI through basic negotiations, I would assume a cost of approximately $750 - $1,000.
- Legal Due Diligence - This process often runs in parallel with business due diligence, and includes such tasks as reviewing all of the seller's material agreements, reviewing UCC search results, reviewing the seller's charter documents, etc. For a company the size of the one we are using in this example, cost would likely be approximately $2,250.
- Drafting and Negotiating Purchase Documents - This category is largely influenced by the level to which the seller and its legal counsel elect to negotiate the agreements, but for the initial set of purchase documents and one round of negotiated changes, I would expect a cost of approximately $3,500.
- Closing - Most transactions these days close via e-mail and/or fax rather than face-to-face meeting, however the age-old practice of making last minute changes to the documents and completing final negotiations at the closing persists. Assuming a 1-day closing, costs will likely be approximately $1,400.
- Miscellaneous - Inevitably issues come up during the course of completing an acquisition, which require various side agreements, modifications to the purchase price or mechanism for paying the purchase price, etc. It's safe to assume additional costs in the range of $3,500 - $6,500 to cover these items.