Purchasing Process

Preliminary Due Diligence

The preliminary due diligence phase is the first step in the purchase process. At Hive Industries, we will attempt to gauge if your company is a good fit for our experiences and strengths. This initial stage is primarily composed of question and answer sessions as we attempt to better understand our potential buyer/seller fit. Below are some of the types of questions we would be interested in knowing during this early phase:

• How does the business model work? ​

• Who are the customers? Is it primarily a few large customers or many small customers?​

• What is the basic structure of the company? How many managers, teams, employees?​

• What key assets does the business own?​

• Who are the key suppliers and what kinds of deals if any are in place?​

• Why does the owner want to potentially sell? Is the owner interested in staying for a short period of time to ensure a smooth transition?

signing the Letter of Intent

If after reviewing the information provided we feel confident that your business would be an ideal fit, we would send you a more formal letter called a “Letter of Intent” (LOI). The LOI represents an agreement that gives both the seller and the buyer reasonable confidence that they can proceed with an overall agreement of key terms before committing significant resources during due diligence.

Common Key Terms outlined during LOI:​

• Purchase price​

• Transaction structure—either purchase of stock or assets​

• Seller debt terms​

• Working Capital Peg​

• Exclusivity period ​

• Non-compete terms for seller after sale​

• Buyer's confidentiality agreement and non-solicitation terms​

• Commitment terms of seller after sale to ensure successful transition of new owners​

Confirmatory Due Diligence

The Confirmatory Due Diligence phase starts by verifying much of the financial information presented during the Preliminary Due Diligence phase through a proof of cash analysis and a quality of earnings analysis. ​Among other due diligence activities, Hive Industries will also perform employee, customer, and supplier interviews to gain a deeper understanding of the business. ​

Signing the Asset Purchase Agreement

The Asset Purchase Agreement is the final legal contract that finalizes the sale of the company.​ Besides going into further detail on all the points outlined in the LOI, the Purchase Agreement contract also defines some of the following more nuanced points: ​

• Acquisition Entity—legal structure of purchasing entity​

• Structure of the purchase—purchase of assets vs stock ​

• Representations and Warranties—protection for buyer against impending claims ​

• Seller Note—final details on seller debt​

• Net Working Capital—final details on net working capital handed at purchase and effects on purchase price from net working capital fluctuations. 

Transition Period

After both parties sign the Asset Purchase Agreement, and the sale of business is finalized, Alan and Carlos will start by working with the original owner on executing an effective transition. The agreed upon transition period will depend on the industry and business, but the goal is to give Alan and Carlos enough time to understand the key components of the business to ensure the company has an optimal chance of succeeding, while not taking too much time away from the original owner.