Legal Blog

M&A Nugget: Buying A/Rs

The purchaser sometimes acquires the seller’s accounts receivable (A/Rs) in an asset acquisition.  The purchase price for the A/Rs may be included in the overall purchase price or added to the purchase price dollar for dollar for the face amount of the A/Rs.  In any event, the purchaser should take steps before, at and after the closing to protect its investment in the A/Rs.  Prior to closing, during due diligence, the purchaser should obtain an understanding of the quality of the A/Rs.  This is accomplished by obtaining a detailed aging schedule from the seller, asking the seller about any troubled A/Rs and conducting public record searches of collection actions instituted by the seller.  The purchase agreement should contain a representation from the seller that the A/Rs are valid, that there are no disputes with customers over the A/Rs and that the A/Rs are collectible.  A current A/R list should be obtained at closing.  Last, a mechanism should be implemented at or promptly after closing to assure that all collections of A/Rs are remitted to the purchaser.  This includes an affirmative obligation of the seller to hand over any payments of A/Rs.  By taking the above steps, the purchaser can ensure that its investment in the A/Rs is protected.

 

 

If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at gsolomon@offitkurman.com or 443-738-1522.

 

ABOUT GLENN D. SOLOMON

gsolomon@offitkurman.com | 443-738-1522

Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.

 

 

 

 

 

 

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 130 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our ten offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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