Whether you are buying, selling, or merging a business, the transaction will involve a complex web of legal, financial, and operational considerations that require careful planning and skilled legal guidance. Nebraska's business community encompasses everything from agricultural enterprises and manufacturing companies to technology firms and professional service providers, and business transactions in this state carry their own set of practical and legal nuances.
Understanding the fundamental concepts, common structures, and critical legal considerations in Nebraska business transactions can help owners and investors make better decisions and avoid costly mistakes. This overview covers the essential building blocks that every business owner should understand before entering into any significant transaction.
Transaction Structures: Asset Deals vs. Stock Deals
The most fundamental decision in any business acquisition is whether to structure the transaction as an asset purchase or a stock purchase. Each structure has significantly different legal, tax, and operational implications.
In an asset purchase, the buyer acquires specific assets and, in some cases, specific liabilities of the target business. The buyer can be selective about what they take, which generally allows them to leave behind unknown liabilities, environmental obligations, and other risks that may be associated with the business entity itself. Asset purchases are more common in transactions involving smaller businesses and those with potential liability concerns. From a tax perspective, buyers typically prefer asset purchases because they receive a stepped up basis in the acquired assets, which allows for greater depreciation deductions going forward.
In a stock purchase, the buyer acquires the ownership interests — the shares of stock or membership interests — in the target entity. The target company continues to exist as a legal entity with all of its assets, liabilities, contracts, licenses, and obligations intact. Stock purchases are often simpler to execute because they do not require the assignment of individual assets and contracts, and sellers generally prefer them because the entire gain is typically taxed at capital gains rates. However, buyers assume all liabilities, including unknown and contingent ones, which makes thorough due diligence essential.
Due Diligence: The Foundation of Any Transaction
Due diligence is the investigative process through which a buyer examines the target business before committing to the transaction. The scope and depth of due diligence should be tailored to the specific transaction, but a thorough review typically covers:
Due diligence is not a formality — it is the foundation on which the entire transaction rests. Skipping or shortcutting due diligence in Nebraska business transactions is one of the most common and expensive mistakes buyers make.
Key Transaction Documents
Business transactions are governed by a series of agreements that must be carefully drafted and negotiated. The primary transaction document — whether a purchase agreement, merger agreement, or asset purchase agreement — sets forth the terms of the deal, including purchase price, payment structure, representations and warranties, closing conditions, indemnification obligations, and post closing covenants.
Representations and warranties are among the most heavily negotiated provisions in any transaction document. The seller makes representations about the state of the business, and if those representations turn out to be false, the buyer typically has a right to seek indemnification for any resulting losses. The scope and survival period of these representations, as well as any limitations on indemnification liability such as baskets and caps, are critical points of negotiation in virtually every transaction.
Nebraska Specific Considerations
Nebraska businesses operating in certain industries face additional regulatory considerations that must be addressed in connection with a transaction. Agricultural businesses may be subject to Nebraska's foreign ownership restrictions on agricultural land under LB 1 and related legislation. Healthcare businesses and certain licensed entities require regulatory approval or notification before a change of control can occur. Businesses with significant Nebraska real property must address Nebraska deed stamp taxes and any existing agricultural lease obligations.
Nebraska's merger and acquisition environment is also shaped by the state's strong relationship with the agricultural, food processing, insurance, and financial services sectors, each of which carries its own regulatory framework. Understanding how these sector specific requirements interact with the transaction structure is an important part of transaction planning.
How Horgan Law Can Help
The business transaction attorneys at Horgan Law Firm have experience representing buyers and sellers across a wide range of Nebraska business transactions, from small business sales to complex multi party acquisitions. We help clients develop a transaction strategy, conduct and coordinate due diligence, negotiate and draft transaction documents, and navigate the closing process. Our goal is to help our clients complete transactions efficiently while ensuring that their interests are protected at every stage.
If you are considering buying or selling a Nebraska business, or if you have questions about structuring a potential transaction, we welcome the opportunity to discuss your situation and provide practical guidance tailored to your specific needs.
