"Buyers and sellers can gain a tactical advantage by having a suitable purchase-agreement form at the ready," says Mark Kaufman.

Why wouldn't a buyer or seller have a boilerplate purchase-agreement form in hand?

A buyer or seller might not have one, or a good one, because they have not done a deal before or recently. Or they may have used different lawyers in different firms or different inside counsel who used different forms of agreement.

What are you suggesting?

We're suggesting that sellers and buyers take time in advance of any actual deal to prepare a standard form agreement ready to submit to the other side right away or at least after a quick tuneup to fit the particular deal.

What gives a purchase agreement its tactical advantage?

Unlike public deals, where there are no surviving representations and warranties, almost every private deal has some representations [statements about the current status of the business] and warranties [guarantees to back up those statements] surviving. If you are a buyer, you want to have a lot of representations and warranties, and you want them to survive as long as possible, with a lot of indemnity to back them up [meaning the seller would compensate the buyer should something go wrong].

And if you are the seller?

If you are the seller, you want the agreement slanted your way: fewer representations and warranties, shorter survival and more limited indemnity. You sometimes find purchasers saying to sellers at the beginning of a deal, “We will get our lawyers to pull something together and get you a draft agreement in a week or two (or some other long period of time).” If you're the seller, you can say, “We've got one already. Let's start with ours.”

What objections can the seller expect after making such a suggestion?

The purchaser may say, “We will be glad to look at your draft, but we want to start with ours.” However, even if the purchaser takes this position, in the interest of getting a deal done and generating goodwill, it will likely tell its lawyers to look at the seller's draft and try to incorporate some of the concepts of the seller's draft. So the seller will have gotten a chance to shape the purchaser's draft before negotiations have begun.

Are some buyers and sellers tempted to really tilt the purchase agreement their way?

There are two theories on this. One is, give the other side a relatively balanced purchase agreement. If it looks fair, the other party is likely to be more willing to accept it without protracted negotiations. The other is, let's give the other side a very one-sided agreement, since if the other side has to negotiate from a disadvantageous starting point, we are more likely to end up with an agreement closer to the terms we want. I personally believe that, in most cases, starting with a relatively balanced agreement works better.

Why?

It gets the deal signed faster, promotes goodwill and generally eliminates the other side responding in kind.