07 Jul You Think It’s Just a Contract—Until It Costs You Millions: The Dangers in the Purchase Agreement Fine Print
You’ve built your company for decades. You’ve negotiated with customers, hired and fired, survived recessions, and scaled what started as a small idea into a valuable enterprise.
And now, after decades of work, you’re finally entertaining offers to sell. The Letter of Intent (LOI) is signed. Diligence is almost over. You’re just waiting for the final legal documents so you can close the deal, get your wire, and move on to the next chapter of your life.
Then the buyer’s lawyer sends over the Purchase Agreement.
It looks long. It looks complicated. But your banker says it’s “standard.” Your general counsel glances at it and doesn’t see anything that jumps off the page.
You’re ready to sign.
And that’s the moment everything starts to go wrong.
Because buried in that fine print . . . within those “standard” -looking clauses and technical legal jargon are provisions that can:
- Force you to refund part of the sale price years after closing
- Expose you to unlimited personal liability
- Strip away your negotiation leverage
- Lock you into earn-outs you’ll never collect
- Let buyers claw back millions based on vague “adjustments”
You think it’s just a contract.
But it’s actually a minefield.
And if you walk through it without an expert who knows where the bombs are and how to defuse them, you will get hurt.
Why Most Business Owners Never See It Coming
Let’s be honest: If you’re like most business owners, this is likely your first time selling a company.
Your buyer? It’s not their first rodeo.
They’ve done this 20, 30, 100 times. They have an M&A (mergers and acquisitions) attorney, a deal team, and a tested playbook.
And that purchase agreement they just sent you?
It’s built to protect them, not you.
They count on the fact that:
- You’re emotionally exhausted from the sale process
- You don’t want to “blow up the deal” this late in the game
- You’re relying on a general business attorney who doesn’t do M&A for a living
- You won’t dig into the details. Until after the damage is done
That’s how smart buyers win at the closing table.
Not by offering less . . . but by hiding risk in the fine print.
Here’s Where the Danger Hides
1. Reps and Warranties That Stick to You Like Glue
These are the promises you make in the purchase agreement about your business.
That your financials are accurate.
That your contracts are valid.
That there are no hidden liabilities, lawsuits, or problems.
And if any of them turn out to be wrong, even by accident, the buyer can come back after the sale and demand you pay them back.
Even if they already own the company.
Even if the issue wasn’t your fault.
Even if it didn’t cost them a dime.
You thought you were done and riding off into the sunset.
But with the wrong reps and warranties? You could be on the hook for years.
2. Indemnification Provisions That Could Drain Your Bank Account
These clauses say how much the buyer can recover from you if something goes wrong post-sale.
Sophisticated buyers push for:
- Long survival periods (2–3 years or more)
- High caps, or no caps, on your liability
- Broad definitions of “losses”
- The right to offset your earn-out or escrow payments
One poorly drafted indemnity section and you’re not really done after closing.
You’re just waiting for the next lawsuit. Or a letter demanding a $2 million refund.
3. Post-Closing Adjustments That Recalculate the Deal in Their Favor
These include working capital adjustments, net debt calculations, and other accounting maneuvers.
You might agree to sell the business for $25 million. But after the buyer’s accountants apply their “adjustments,” you only net $21.7 million.
And they’re not asking. You already agreed to it in the contract.
4. Earn-Out Terms You’ll Never Collect
Buyers love earn-outs. Sellers hate them – after the fact.
Why? Because the buyer controls the performance after closing. Since you’re no longer the owner, you’re not in the driver’s seat anymore. Those milestones they set that you think are lofty but you should be able to reach? Your hands are now tied.
The buyer can do a number of things to make you reaching those milestones (and getting your earnout payment) a pipedream.
They might:
- Cut your marketing budget
- Fire key employees
- Reallocate revenue to other divisions
- Miss the targets they helped set
And since the purchase agreement gives them full discretion?
You get nothing.
5. Boilerplate Clauses That Strip Your Rights
You gloss over them because they’re “standard”:
- Governing law
- Venue
- Dispute resolution
- Integration clause
But these determine where you’ll fight if there’s a dispute, what laws apply, and whether you have any right to challenge anything after closing.
And once the ink is dry, you can’t take it back.
The Devil Is in the Details
You think the big negotiations happen up front. Price. Deal structure. Terms.
But where sellers win or lose millions is in the final contract.
The purchase agreement is where the buyer’s team goes to work — embedding landmines you won’t discover until it’s far too late to fix.
This is where deals go from “generational wealth” to “what happened?”
Don’t let that be your story.
Apply to Work With Us
At our firm, we work with a select group of business owners each year who are serious about selling their companies for full value. Without getting blindsided by legal traps.
This isn’t a job for a generalist business lawyer.
We don’t dabble in representing business sellers.
We live and breathe deal defense.
If you’re selling a company valued between $10M and $50M, and you want to protect what you’ve built, we invite you to apply to work with us.
👉 Apply here: https://lgarzalaw.com/schedule-online/
