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W EEKLY EDITION MAY 23, 2018 Buying a Rental Business By James Waite, reprinted with permission of the author Question: I currently own and operate several rental [businesses]. I'm thinking of buying a competing [company] in a nearby town, but I'm not certain where to start. What should I be thinking about as I attempt to move this process forward? Answer: In gen eral, acquiring a rental business can be preferable to opening a new [one] for a number of reasons. Established sellers may have prime locations, facilities, staffs, software, customer bases and other established relationships that can make expanding into new markets much quicker and easier than attempting to grow organically into such markets. Since the early 1990s, I've worked on dozens of rental company acquisitions and sales. Each transaction is different — stock vs. assets vs. merger; cash vs. seller - financing; equipment vs. party; heavy equipment vs. general tool; owned vs. leased real estate, and more. This makes the work interesting, but also tends to make it virtually impossible to rely heavily on document templates or "one - size - fits - all" ap proaches. That said, there are some basic rules I generally recommend to prospective purchasers. Though it would be impossible to adequately address all of them in a single article, there is some basic information, excluding legal jargon to the extent pos sible, those interested in buying a rental business should know. Transaction process. The acquisition process usually takes at least several months and, broadly speaking, tends to follow a path similar to this: • An initial discussion, often initiated thro ugh a business broker or attorney with contacts in the industry, but casual conversations can generate valuable leads as well. • A confidentiality/non - disclosure agreement is signed. • Initial due diligence is conducted, usually consisting of a review of an of fering package, summary financial statements and basic information pertaining to the company and its assets. • A letter of intent, preferably non - binding, except with respect to confidentiality, setting forth basic deal terms prepared and signed. • Commencemen t of "due diligence" inspection, which is the buyer's examination of the seller and seller's business in earnest. • Negotiation of transaction documents, such as a purchase and sale agreement, assignments of equity or assets, real estate lease or sale agreem ent, noncompetition agreement, employment/consulting agreement(s), escrow agreement and financing documents. • Completion of due diligence investigation, legal compliance, lien clearances and finalization of closing documents. • Closing, which is the consummat ion of the transaction and payment of funds. • Post - closing purchase price adjustments and related activities. P AGE 3 CONTINUED ON PAGE 4