Integrating Legal Insights into Creative Strategies: Understanding Entity Purchase Agreements
When it comes to the world of marketing, creative strategies are often more emphasized than the legal underpinnings of a transaction. However, as any smart marketer will tell you, there is value in understanding the legal forces at play when structuring an agreement for purchasing an entity. At Shaparak Marketing, we believe that brand strategy can begin through advanced legal frameworks. You might be asking yourself, how can a marketer boost their client’s brand strategy by looking at the legal implications of an entity purchase agreement? The answer is simple: the purchasing of an entity requires more than just a monetary exchange for assets. It is about understanding your client’s objectives, how those objectives are bound by legal terms, and how to market those objectives to the client on the other side of the table. If done correctly, business purchase agreements can actually be a major win for brand strategy as well.
Why is it important to understand what an entity purchase agreement is?
In the most basic sense, an entity purchase agreement is a binding contract that outlines the sale of either the assets or shares of a business entity (very similar to M&A agreements). Unlike an APA or an M&A, an entity purchase agreement applies to either the purchasing of a limited liability company, a corporation, or another type of entity. Because there is such a range to Entity Purchase Agreements, it is crucial to bring in the right resources to get the job done. What is much more applicable to a sole proprietorship business may not work the same way for a large corporation. According to entity purchase agreement specialist and author, Michael Harr, the purpose of an entity purchase agreement is to protect the seller and the buyer in the event that the entity hasn’t disclosed all of its liabilities or assets. This makes the process by which these agreements are drawn and signed an inherent risk-management and insurance-recovery service. Because of the inherent risk involved in entity sale agreements, it may be difficult for marketers to find ways to utilize already established brand initiatives to further enhance your client’s relationship with the other party involved in the deal. This is where creativity and legal know-how come into play for marketing professionals as they deal with deals involving the purchasing of an entire entity.
How do entity purchase agreements apply to creative strategies?
To reiterate the importance of a thorough and well-researched APA or M&A, if the agreement fails to disclose all of the liabilities of the entity in question, the buyer and seller are both at risk. If the buyer capitalizes on the sale of the entity without disclosing the failures of the product or service, the buyer can be tried for misrepresentations or fraud, depending on the nature of the disclosure. This impacts marketing strategies because in order to ensure the integrity of the deal, the marketer of the buyer and the marketer of the seller should ensure that the legal team has covered all aspects of the deal. Without understanding the nuances of an entity purchase agreement, the marketer may short-change themselves and the other party involved in the deal.
This is why understanding the legal agreements that go into entity purchase agreements is important. By understanding some of the nuances of an entity purchase agreement, marketers can help their clients sell the idea of potential investment into the buyer’s products or services. This does not mean that the deal will go through, but the buyer may feel as though the investment is worth pursuing.
How can I make sure that our legal mechanisms are working together?
It is important that the marketing strategies work together with the legal teams involved in the deal. A marketer must make sure that the legal terms are upheld, but also portray the company in a way that works for the brand.
