Let the buyer beware, definitely something to keep in mind when you are purchasing a business.
I have a client that was working through the due diligence for the purchase of a competitor for months, only to have the business sold to an employee right before the signing of the final contract.
This client was lucky compared to another business I am aware of. With this purchase the employee bought the company. Talks had been going on for months, possibly years but never in too much specific detail, just general terms. Then the owner made the final decision to sell and the contract had to be drafted, finalized and signed in less than a two month period.
One aspect that was not included in the contract was a “claw back” provision which means that if the seller directly pulled clients from the buyer to move to another broker for a fresh commission, the buyer would have a provision that would allow them to get some of the purchase price back, i.e. “claw back” some of the money! (This, by the way, is seemingly what the seller did in bulk.)
Now the buyer has paid an unwarranted premium on the business.
If looking to purchase an existing business in the future make sure that you have checklists, time for due diligence and ensure that you have a team looking out for your interests and protection.