What are Disclosure Schedules? (M&A Jargon)

In this video, we talk about disclosure schedules (sometimes referred to as "seller's disclosure schedules" or simply, the "schedules"). Disclosure schedules are an addendum (exhibit) to whatever primary deal document the parties are using (typically either a stock purchase agreement, asset purchase agreement, or merger agreement). The disclosure schedules play an important role in mergers and acquisitions (M&A). In this video, you will learn more about that role and how the schedules function in the overall context of the M&A transaction.
Here is a link to an example of disclosure schedules -
merger-resources.com/sellers-...
_____________________________________________
Have questions? Book a call, and talk to Brett today:
clarity.fm/brettcenkus
_______________________________________________
You can reach Brett through:
clarity.fm/brettcenkus
/ brettcenkus
/ bcenkus
www.cenkuslaw.com
braatenwoods.com
merger-resources.com
_______________________________________________
Brett A. Cenkus has 20+ years of experience in business law, finance, and entrepreneurship. Through Cenkus Law, PC, he provides advice and services for mergers & acquisitions (M&A), securities offerings, founders’ agreements, and other general business law issues.
Through Braaten Woods, LLC, Brett helps business owners in the lower middle market ($2MM - $25MM) position themselves for sale, find buyers, negotiate, and close M&A deals.
Brett also maintains merger-resources.com, a site packed with free articles, videos, checklists, deal diagrams, template contracts, and other tools to help pass M&A knowledge to others.
Brett regularly consults with entrepreneurs and invests his own capital as an angel investor.
From 2010-2013, Brett served as Chief Legal Counsel of a publicly-traded international oilfield services company. From 2001 to 2006, he and a partner founded and built Paragon Residential Mortgage. Bridge Investments acquired Paragon in 2006.
Brett holds a Juris Doctorate from Harvard Law School and a Bachelor of Arts degree in Economics from Messiah College in Grantham, Pennsylvania.
Brett lives in Austin with his wife, Cathryn, and two children. He enjoys reading, squash, classic movies, great food and wine, and the New England Patriots.
#corporatelaw #mergersandaquisitions #businesslaw #corporatelawyer

[@TheAspiringBoss]

This is such a good resource for young m&a lawyers. I had no idea what they were when i started my career and big were they important! Great video!

[@BrettCenkus]

Thank you!

[@robertcesar9752]

​@@BrettCenkus what business oriented books would you recommend a corporate interested law student read to gain a better unstinting of a business's perspective in M&A transactions? (i second the below question). also could you make more videos if you have the time?

[@RS-fy4cg]

You are such an amazing lawyer. Very helpful and smart!!

[@allnone4277]

Extremely grateful for these videos 🙏

[@warrenma9784]

Hi Brett, I just wanted to drop you a quick message to say thank you. Your videos helped me immensely in my preparation for interviews and case study assessments and I was able to secure a training contract with a major international law firm in London, UK. All the best moving forward and stay safe!

[@Frontfootback]

Super helpful thx.

[@BrettCenkus]

You're welcome.

[@RRPartnersBucharest]

Great content, so interesting to see another law system 👍

[@BrettCenkus]

Glad you enjoyed it!

[@xy1556]

@brett Cenkus, what business oriented books would you recommend a corporate interested law student read to gain a better unstinting of a business's perspective in M&A transactions?

[@tonyanalla8794]

Hey Brett, I have been enjoying your series of videos thank you for sharing. I would love to hear your thoughts on M&A when one of the parties involved is based in a foreign country. Is it very often that the benefits international deal outweigh the costs? How does this influence the process of making a deal? Would the M&A team require additional members? Do certain firms specialize in international M&A?

[@flostv3387]

Hi Brett, A quick question about the "timing" disclosure schedules should be reviewed etc by the buyer. My understanding is that it's best to be provided with them at the due diligence stage, but is it okay to actually put them together/review/change etc during the interim period between the signing and closing of the Purchase and Sale Agreement? I mean this is as long as the seller has actually provided the buyer with the disclosure schedules. Is it okay for parties to sign (more so for the buyer) before getting the disclosure schedules? I assume no, but I'd be grateful for some guidance. Thank you!

[@aseelsd11]

Thank you so much for the valuable content you make!!! Literally EVERY single word you say teaches me so much and has helped me so much on my practice! So thank you!

[@benjaminsibson4265]

Hello Brett, I’m currently 17 and I intend to go into M and A one day (hopefully). Is there anything you’d recommend to get into this field? Should I learn accounting and M and A law prior to going into it?

[@k-lawconsultingkoreanlawbu2934]

Thank you for your insight. Actually I am practicing KOREAN LAW, especially cross-border M&A and business transactions, in LA. Hope we can have a good conversation sometime later.

[@BrettCenkus]

Thank you, Jin Hee

[@user-pl7oe3ys1n]

@@BrettCenkus Hi Brett, I need your whatsAAp number urgently for commercial case

[@BrettCenkus]

@@user-pl7oe3ys1n You're welcome to book a paid call with me at clarity.fm/brettcenkus. Because I have limited time and lots of in-bound calls, we do not schedule unpaid calls (free consultations, etc.).

[@user-pl7oe3ys1n]

@@BrettCenkus I don't know how can I call on this system, pls teach me.

[@Chosen_One]

Unrelated, but if I want to do a roll-up, would it benefit me to form a corporation at some point? I'm not clear when that's necessary vs an LLC. Would it be better to have multiple LLC's with the same DBA?

[@Ravindersingh-cs4fn]

hii brett love you videos can you tell me i am a undergraduate in b.a but my gpa is not good enough for top law schools which i want to take admission into .so, should i do post graduate m.a and work my ass off to obtain good gpa and then apply for law school ....is it worth it?

[@Threeletterorg]

I miss these:(

[@Fallentc]

Hey Brett, When buying a business, but bank needs the commercial lease extended. Is it normally the responsibility of the seller to renew first? What happens if the seller refuse to take on the risk, how can we renew the lease before closing?

[@BrettCenkus]

The bank should be fine with making the signing of the new lease (or assignment/amendment of the existing lease, whichever approach the parties use) a condition to closing, i.e., sign it to go into effect at the closing. The deal needs to be fully fleshed out and committed to paper (i.e., a new lease between landlord and buyer ready to go or fully-negotiated assignment and amendment). However, it does not need to take effect if the deal does not close. Sellers sometimes negotiate the extension/new terms or coordinate the negotiations alongside the buyer if the seller wants to make use of the extension terms anyway if, for some reason, the deal does not close. But if the seller doesn't want the extension terms, the simplest thing to do is handle the new lease (or assignment and amendment of the existing lease) as a closing condition.

[@mitchellmccauley160]

Hi Brett you never fail to impress me with your great videos, you're helping a lot! I'm wondering, why would someone want to buy just the assets of a business over the equity? It doesn't seem reasonable for the seller to do such a thing because of tax reasons but I don't understand why a buyer would want to choose assets over equity, could you give your professional opinion on the matter?

[@mitchellmccauley160]

Never-mind, just watched one of your other videos that answered my question thoroughly

[@BrettCenkus]

@@mitchellmccauley160 Mitchell, I am glad you found another video that addressed your question. For other viewers (and good measure), two key reasons a buyer will choose to purchase assets vs. equity are (1) to avoid taking on liabilities (especially unknown ones), and (2) to receive a "stepped-up" basis in the book value of the assets (i.e., to reprice them to fair market value for accounting purposes. Also, FYI, for sellers who are LLCs taxed as partnerships, s-corporations, or other "pass-through" entities, the tax consequences of selling assets vs. equity are often not that big of a deal.

[@mitchellmccauley160]

@@BrettCenkus Perfect well said, just added that one to my notes thank you very much!

[@RISHIRAJ-xc7tu]

At actual, purchaser sends purchase order for supply or services , as per final negotiation. But they add standard terms also. In return, supplier accepts PO , with some comments. Then work started and exchanges payment. Neither purchaser objects on comment nor issue revise PO. This is very common in real world. Please advise legal standings.

[@benjaminsibson4265]

Hello Brett, I’m 17 at the moment and my dream is to go into M and A. I’m curious, in your experience, are there many people who buy companies with little personal money down?

[@BrettCenkus]

No, Benjamin, it is not super common. And I think it's oversold as a marketing concept. There are many high-priced courses to teach you the secrets of buying businesses with no money down, and I suspect most students don't pull it off. It can happen, although it's not easy, and, absent very unique circumstances, the businesses selling for no money down are not the most attractive businesses available. I don't think that point can be debated. Obviously, a seller of a business that is in demand will greatly prioritize simpler structures with more cash at closing vs. more complicated structures, which almost always require the seller to carry a note (i.e., be paid some of the purchase price over time under a promissory note) on a deal where the buyer has no true "skin in the game." No money down doesn't mean the seller gets nothing, although, still, any no money down deal would almost certainly be a less attractive deal structure. It may have other positives to it, so, again, it's not impossible to do this, just quite challenging and not super common.

[@braydenc932]

Are independent contractors (if any) mentioned in this document?

[@BrettCenkus]

It depends, although not typically. A buyer may ask a seller to list its suppliers by dollar volume (the top 10 or 20 in the past year or two) and, it's possible that an independent contractor could make that list. Or a buyer may call for independent contractors to be listed in a separate schedule, especially if the buyer believes that some of the independent contractors are critical to running the business. And, while this is a little different than what your question appears to be asking, a seller will almost always need to represent that they are correctly classifying independent contractors (i.e., that none of the independent contractors should be considered an employee and paid a salary through payroll (as a W2 employee).

[@braydenc932]

Brett Cenkus thank you for the in depth response, I really appreciate it!

[@Frontfootback]

Hey Brett, can you a video on reserve matters for minority investors?

[@BrettCenkus]

Benjamin, do you mean things that a company cannot do (i.e., actions it can't take, decisions the majority owners can't make) without approval of the minority investor(s)?

[@Frontfootback]

Brett Cenkus yup

[@BrettCenkus]

@@Frontfootback That's a great topic! I will get it done. Thank you for the suggestion.

[@LoLasheLoL]

brett pls make more videos

[@BrettCenkus]

Will do, Robert. For no great reason, I have been on a COVID new video hiatus. I'll start posting new videos again soon. Thank you for watching (and for the encouragement!).