Legal Blog

M&A Nugget: Buying A/Rs

The purchaser sometimes acquires the seller’s accounts receivable (A/Rs) in an asset acquisition.  The purchase price for the A/Rs may be included in the overall purchase price or added to the purchase price dollar for dollar for the face amount of the A/Rs.  In any event, the purchaser should take steps before, at and after the closing to protect its investment in the A/Rs.  Prior to closing, during due diligence, the purchaser should obtain an understanding of the quality of the A/Rs.  This is accomplished by obtaining a detailed aging schedule from the seller, asking the seller about any troubled A/Rs and conducting public record searches of collection actions instituted by the seller.  The purchase agreement should contain a representation from the seller that the A/Rs are valid, that there are no disputes with customers over the A/Rs and that the A/Rs are collectible.  A current A/R list should be obtained at closing.  Last, a mechanism should be implemented at or promptly after closing to assure that all collections of A/Rs are remitted to the purchaser.  This includes an affirmative obligation of the seller to hand over any payments of A/Rs.  By taking the above steps, the purchaser can ensure that its investment in the A/Rs is protected.



If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at or 443-738-1522.


ABOUT GLENN D. SOLOMON | 443-738-1522

Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.








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