20 questions to ask a travel agency seller

Travel Weekly

a day ago

Mark Pestronk
Q: There is another agency in my community that I want to acquire. With my attorney's help, I have already drafted a nonbinding letter of intent with the key business terms, which I expect the prospective seller to sign. I have also reviewed the agency's financials, tax returns and key contracts. Now, I need to have my attorney draft the actual purchase agreement. To enable my attorney to do the best job, what information do I need to ask the seller for now?
A: Here are 20 questions for the seller that will help your attorney zero in on all the legal issues and draft a good agreement:
1. What is the agency's full legal name, and where is it incorporated or organized?
2. What are the owners' full legal names, and how much does each own?
3. Is there an agreement among the owners, and if so, what does it provide for?
4. Are the owners related to each other?
5. Who are the agency's officers, directors or managing members?
6. Are there any other companies that are under the same or partly the same ownership?
7. Are there any nontravel-related lines of business within the company?
8. Does the agency have any debts or liens on its assets?
9. Does the agency have any employment or IC agreements that can't be terminated at will?
10. Does the agency have an ARC appointment?
11. Does the agency have a GDS contract, and if so, when does it expire?
12. Does the agency have an office lease, and if so, when does it expire and how much is the security deposit?
13. What other contracts does the agency have that cannot be terminated in 30 days or fewer?
14. Does the agency hold client deposits, and if so, how much are they?
15. Are there any future bookings that will require a buyer to pay out of its own funds (e.g., cruise group deposits paid in advance of collecting from clients)?
16. Which key employees will be retained, for how long, for what compensation, and what duties will they have?
17. Is there any threatened or actual litigation, and if so, what are the details?
18. Are there any other obligations not in the ordinary course of business?
19. Why does the owner want to sell?
20. When would the owner like to close the transaction?
Once the agreement is drafted and is acceptable to the seller, you will need to get lots more information to add as exhibits to the agreement, such as lists of tangible assets, contracts, employees, ICs, top clients, top suppliers, client receivables and accrued vacation and other pay. You will also need to add financial statements, along with a warranty that the financials are correct.
Finally, in the typical agency acquisition, commissions that are unpaid as of closing will often be automatically deposited into the seller's bank account. If the purchase agreement provides that you get any of this money, you need to list those commissions plus a commitment for the seller to remit them to you after closing.