Good news: Your business may be able to grow or be enhanced by buying the assets of another company, such as customers, contracts, trademarks, software, technology, patents, trade secrets, key vendors, key employees, copyrights, royalties, etc.
Bad news: The assets you wish to purchase may not be truly owned by the seller and/or may be encumbered by litigation, unpaid royalties, unpaid taxes, debt, etc. Some of these assets may be owned my minority shareholders, employees, subcontractors and/or others.
Customers: Is the relationship with the seller’s key customers with the owner or is the relationship with lower-level sales people. Would the key customer consider moving from the seller to your company? What is the definition of the key customer, is it a high sales volume or profitability? If profitability, can your company duplicate the process the key customer wants? Can your company provide the goods and services the key customer needs in order to maintain and/or improve the current gross profit margin. Does any key customer have a negative reaction to your company or its name? Does the key customer pay on good terms or does it require “special” payment terms in order to do business with the seller?
Contracts: Your business may want to purchase important contracts from a seller. If so, is the contract entirely in writing and does the written contract allow a transfer to another entity? Are there special provisions in the contract, such as bonding, licensing and/or some compliance to regulatory authorities?
Trademarks: Trademarks are governed by the United States Patent and Trademark Office (USPTO). Your intellectual property attorneys should be able to verify that the trademarks are owned by the seller. Does the trademark have a “principal” or does it have a different designation? What are the financial differences to your company between a “principal” designation and one with a different type of mark?
Patents: Patents are governed by the United States Patent and Trademark Office (USPTO). Your intellectual property attorneys should be able to verify that the patents are owned by the seller and if they are transferable. Your attorneys should investigate to determine if there are disputes or lawsuits related to the patents the seller claims to own. Have the seller’s patents recently been devalued due to patent theft from foreign companies? Are there multiple owners of the patents and do all owners agree to sell the patent for the price offered?
Software: Your business may want to purchase software from the seller. If so, is the software owned or licensed by the seller? Does the seller truly have ownership or licenses for each software application on its file server and individual computers? Has any software been “pirated” by the seller in order to save money on licensing?
Software and employees: Some states allow full-time employees to have ownership rights to software they develop, unless their employer has them sign certain legal documents, such as Proprietary Rights and Restrictive Covenants Agreements, Non-Disclosure and Rest restrictive Covenants Agreements, etc.
Software and independent contractors: Some states allow independent contractors to have ownership rights to software they develop, unless their customer/client has them sign certain legal documents, such as Proprietary Rights and Restrictive Covenants Agreements, Non-Disclosure and Rest Restrictive Covenants Agreements, etc.
All software: The subject of software of a company can be very complicated and may include the following:
- Websites or sections of websites
- Customized software
- Software which the seller is not yet aware of being created for its company
- Software created for the seller by using software that its independent contractors or employees personally license and/or own
- Software on the seller’s file servers and/or computers that has been illegally obtained without purchasing legal licenses for the usage of the software