Acquirers would most likely want all of the following reps and warranties included in the final contract:

Assets
Acquirers want to make sure that they are getting full title to all of the assets included in the sale with emphasis on intellectual property and patents. Acquirers also want assurances that the machinery and equipment are in good working order. Also, all assets are to be delivered free and clear of all encumbrances unless otherwise specified.

Financial Statements
A closing audit is important to verify the authenticity and actual amounts of all of the items included in the sale with special emphasis on inventory, receivables, cash (if included) and payables.

Taxes
It is critical to verify any tax liabilities if it is a stock purchase. In the case of an asset sale, the new owner wants to make sure there are no liens on assets due to unpaid taxes, or any other lien against the assets being purchased.

Pending and Potential Litigation
This is obviously a big issue with a consumer product due to our litigious society. Acquirers don’t want to be responsible for product liability created under the seller’s ownership. However, sellers will most likely want a time period and/or cap on their total responsibility.

Environmental Issues
This is a stumbling block in many transactions. Just because the acquirer leases the premises does not mean that he or she would not be liable for environmental issues. This is especially true in transactions in which the stock is transferred and the lease is in the corporate name. The acquirer should make sure that the seller remains liable for any environmental problems that developed while the seller owned the business.

Employee Relations
Even if the sale is one of assets, so that the new owner may not be contractually liable for employee agreements, these agreements should be honored by the new owner. This is, of course, assuming the new owner wants to retain the employee(s) under contract. Even if an employee has certain privileges or benefits that are not contractual, a new owner might want to continue them in the interest of good employee relations.

Authorization
Sellers should make sure that they have the complete authorization of the stockholders and/or the Board of Directors to sell the company. Sellers will be expected to disclose all liabilities, contracts, stock options, etc. They will also be expected to ensure that wages, taxes and all insurances are current and all employee agreements are disclosed.
An all-important issue is which representations and warranties survive the closing and which ones cease at the closing.

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Neglecting to run the business – One cannot neglect the day-to-day operations of the business while trying to sell the company. This is especially likely to occur when an owner allows too many prospective acquirers to look at the business. This can be avoided by using the services of a professional intermediary.

Placing too high a price on the business – Acquirers generally have a good idea of what a particular business is worth in the marketplace or they have advisors who do. The old adage that one can always lower the price but not raise it doesn’t work in selling a business. A shopworn business is doubly difficult to sell.

Failing to remind acquirers of confidentiality – The more prospective acquirers that visit a business, the more likely that confidentiality will be breached. This is another good reason to use a professional intermediary – a professional intermediary will qualify an acquirer prior to even revealing the name of the business.

Selling impulsively – This probably needs little explanation. One of the biggest reasons deals fall apart is that the seller really wasn’t ready to sell. Don’t go to market unless you are really ready to sell.

Not anticipating the requests of acquirers – Sellers should get all of the paperwork, information, etc., ready that they would like to see if they were buying the business. This should be done prior to taking the business to market.

Being a nitpicking negotiator – Sellers who try to negotiate every little point, or try to win on every point, will force most acquirers to walk away from a deal. A good negotiation is a win-win for everyone. Pick your battles by being willing to give in areas that aren’t really that important and stressing only the ones that are.

Not willing to stick around after the deal – Many sellers don’t want to stick around after the sale. But, many acquirers want the seller to stay after the sale as it reduces the new owner’s risk and allows for an orderly transfer of management.

Inflexibility in the structure of the deal – Most sellers start off wanting an all-cash deal. Very few end up that way. An inflexible seller trying to find an all-cash acquirer creates a major obstacle in selling a business.

Letting the deal drag – Almost all successful business intermediaries and transaction attorneys will tell you that the longer a deal drags on, the more likely it is that it will never close. The longer it goes, the more likely it is that skeletons will come out of the closet on both sides.

Failing to conduct due diligence on the acquirer – Many sellers neglect due diligence. And yet, that’s exactly what the acquirer is doing on the seller and the company. Is the acquirer qualified not only financially, but operationally? Can he or she run the company?

Not using experienced advisors – Using the family attorney who is also a close friend may be comfortable, but may not be a good choice. A good experienced transaction attorney is a most valuable asset. A professional transaction intermediary is also a wise investment. Surround yourself with the best you can – because the acquirer is probably going to do so.

Experienced deal-makers and advisors report that only about 50 percent of the deals that get to the Letter of Intent stage actually close. The reason is often one or more of the eleven points listed above – on the buy side or the sell side or, unfortunately, both.