Purchase agreement part one: follow the money
Closing mechanics turn headline value into actual proceeds.
The purchase agreement is the binding document that converts negotiated economics into a closing. Start the review by following the money.
Identify the purchase-price definition and trace the bridge from enterprise value to equity proceeds. The agreement should address cash, debt, debt-like items, unpaid transaction expenses, working capital, and any other agreed adjustments. Compare each definition with the letter of intent and the financial model; small wording changes can produce material differences.
Then review payment mechanics. Which amounts are delivered at closing? Which are deposited into escrow or held back? Is any consideration paid through a seller note, rollover equity, or earnout? Who serves as the paying agent or sellers’ representative? How and when are funds released?
Examine the estimated closing statement and post-closing true-up. The document should state the accounting principles, order of precedence, access rights, review periods, dispute process, and role of any independent accountant. These provisions determine how an unresolved calculation becomes final.
Allocation schedules also matter in asset transactions and certain equity transactions. They can affect tax outcomes and should be coordinated with tax advisers before they become fixed.
This review is not a substitute for legal advice. It is a commercial discipline: every number in the agreement should reconcile with the owner’s proceeds model and the deal the parties believe they negotiated.