In almost all cases, when you sell your company, you will enter into a purchase agreement that will include Schedules. In most cases, the agreement will be drafted such that the seller will make representations about the business, supported by lengthy Schedules.
The following are a few examples of purchase agreement Schedules:
- Equipment: you may be asked to represent that you own all of the machinery and equipment in your facilities, other than those items scheduled as leased and not owned.
- Top Customers: you may be asked to represent that none of your top five customers have recently indicated they will materially decrease purchases from you, and provide a schedule of revenue for each of your top five customers last year and the current backlog or outstanding purchase orders by customer.
- Unused PTO: you may be asked to represent that you are properly accounting for personal time off and provide a schedule of unused vacation time per employee.
Schedules can require significant administrative support. During a typical sale process, they need to be constructed quickly, so as not to delay the closing. They also can pose a meaningful liability on the seller, if they contain material mistakes.
Accordingly, we always advise our clients to plan to construct Schedules well ahead of time. Ensure that you have the right systems and information available in real-time. Ensure that you have the right staff in place and that they are aware of the sale process far enough in advance to support you and the sale process in a timely and highly accurate manner. When selling your company, do not wait until the last minute to ask your staff to construct the Schedules.
Have a great day everyone.
Bill Alderman
President
