Deal Closing Guide

Due Diligence

While you may be excited to get busy owning your future, we can’t stress enough the importance of having a conversation with the seller and doing your due diligence. Not only can you learn about the value of the business, but you can learn some tips on what you might want to do once you acquire it.

Due Diligence is an essential process for any buyer to perform as it ensures that one fully understands what they are buying as well as verifying all claims made by a seller to ensure it is as advertised. We have put together a checklist of things that you should be looking at and checking as part of your due diligence. Not all items may apply to your purchased goods.

Why it’s important

Pricing

Get a Valuation

Deal Closing Guide

Top Tips:

Review this guide.
It's your reference point when completing a deal. Buyer or Seller, you will find everything you need to successfully and safely complete.

Complete Due Diligence.
You can handle this yourself. Take advantage of our templates and checklist or engage an expert.

Exchange an LOI and asset purchase agreement.
You are buying or selling an asset, and it’s serious business. With Flippa Legal, you can purchase a bundle of template legal documents (asset purchase agreement and bill of sale) which are tailored to the asset you are buying and selling. These fillable PDF templates are suitable for transactions valued under USD$10,000. For transactions over USD$10,000, we recommend purchasing a legal services package.

Prepare an Asset Register.
This is a list of everything that will be handed over and can really help when finalizing the close.

Flippa partners with Escrow.com to offer escrow services for Flippa transactions. Escrow is a secure payment method where the Buyer's payment is in a third-party account during the asset transfer process and is strongly recommended for higher-value Flippa transactions. Learn more >

Payment Options

PayPal is offered for sales up to $2500 or where one party is in a country that is not supported by Escrow.com. The consideration that needs to be made when using PayPal is that there is no inspection period for the assets.

If either party can’t access Escrow or PayPal due to their country, then please talk with our Deal Completion Team for transaction.

Other

Sale Contract and
Documentation

An asset purchase agreement facilitates a transfer of ownership of assets from one party to another. It clearly defines the terms of sale to ensure they are legally binding and minimizes the likelihood of a dispute occurring in the future. A typical asset purchase agreement will acknowledge the transfer of ownership of assets from seller to buyer, identify the assets to be transferred and address issues such as confidentiality, conditions precedent to sale, employees, post-sales support and training, relevant warranties and indemnities and restraints.

Asset Purchase Agreement

A bill of sale documents the change in ownership of assets. Each asset-specific template bundle available for purchase via Flippa Legal contains an asset purchase agreement and bill of sale. Except for a domain sale, which has an asset purchase agreement only

Bill of Sale

Financing

Seller Financing

Seller financing is where a seller finances a proportion of the purchase with a longer-term payout period and with interest charged on the remaining balance until final settlement.
Read article >

Earn Outs

Earn-out agreements are where a buyer will fund a portion of the sale upfront. A buyer then makes regular payments over a number of months from the businesses revenue or their own finances to pay out the seller. Read blog post >

Growth Capital

Growth capital (also called expansion capital and growth equity) is a type of private equity investment, usually, a minority investment, in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business.

Acquisition Financing

Acquisition financing is the capital that is obtained for the purpose of buying another business. Acquisition financing allows users to meet their current acquisition aspirations by providing immediate resources that can be applied to the transaction.

Transition Planning

An asset register/transition list is a great tool for both buyers and sellers. It outlines all goods that are to be provided as part of the sale and the order or timeline they will be delivered in. Parties would work together to create one, then it becomes a checklist once a sale is funded and the transfer of assets begins.

Asset Register / Transition List

Flippa has template legal documents available for sale which are asset-specific. You can find them here.

Asset purchase agreement

Setting up merchant and bank accounts

As part of the transfer of assets, you may need to set up accounts with banks to receive revenue etc generated by the business. This may be in the form of merchant bank accounts, Stripe, PayPal, Payoneer, or other services. Talk to the seller about what they use so you have an idea of what you may need to set up.

Account Transfer

As part of the transfer of assets, there may be accounts for services used to operate the business that needs to be transferred to you or your ownership. This may be payment accounts, hosting accounts, affiliate accounts, or other service accounts. Your APA and asset register list will give you a good idea of the accounts, and the seller will also advise.

Account Sign Up

As part of the transfer of assets, you may need to sign up for some services where the seller cannot transfer or migrate their accounts to you. Generally, new accounts are needed for services that don't allow or permit account transfer such as Google services, PayPal. The seller will advise on any such needed accounts.

Post-Sales Training

Is the seller offering post-sale support? They may have outlined it on the listing or mentioned it during your discussions. This would be an aspect agreed between parties and added to the sale agreement terms. Training should cover the day-to-day operations of the business and be used so that processes can be documented. It's often not until a current owner steps away from the asset that you will find those knowledge transfer gaps.

Flippa Protections

Trust & Safety are top priorities here at Flippa.

Outside of having buyers and sellers verify themselves on the platform prior to being able to sell or buy we also provide safe options to transact in the form of:

• Guides for those not familiar with our services.
• By giving buyers and sellers access to legal services and template legal
documents via Flippa Legal.
• A safe and secure deal completion area to communicate and share
information.
• Escrow services that provide safe and secure means to transact.
• Our Deal Completion Team to provide support and advice throughout a sale.
• Due diligence services.

While we are able to support a sale and provide materials and services that can be used we do note that we are not a party to the sale between a buyer and seller.

Should issues arise with a sale we will do our best to help resolve any issues between parties as per our dispute process. Should no resolution be found via our dispute process we may direct you to arbitration to obtain a binding determination that we would also adhere to. Please also be aware that Escrow.com has its own dispute resolution process which may form part of the dispute process.