Purchase & Sale of Internet & Technology Businesses

Contact Neufeld Legal PC for technology & Internet legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

Dealing with the purchase or sale of an internet/technology business from a legal perspective differs from traditional businesses, given the alteration in the business model from the traditional reliance upon fixed physical assets and location. Instead, your business is driven by its innovation and its capacity to attract a far more expansive customer base. The core of your business is derived from the underlying source code, which is the basis for a web-based business' corporate valuation. Thus transactions must correctly account for the unique nature of the business transaction, whether it entails launching, buying or selling an internet business, engaging in a joint ventures, contract negotiations or providing internet services to traditional businesses.

With the rapid evolution of the world wide web and e-commerce, professional advice must adapt and innovate to meet the rapidly changing dynamics of the internet. The direction and pace of the internet's development makes it exceedingly difficult to predict, as such it is important to attempt to stay ahead of the curve, which needs a solid understanding of the business and its internal operations. What we strive to provide is such advice, drawing from our own work seeking to optimize the profit potential of the internet and thereafter using that knowledge in our provision of business and legal advice.

Unique Character of Internet-Based Business and their Sale

Companies that are dependent on the Internet for their revenue generation present a very unique dilemma. For this dependence on a highly fluid and ever-changing medium through which business is created, can proceed in one of two ways, it can either undergo significant future growth or it can be significant losses and/or be entirely supplanted by more effective competition. This is the stark reality of the Internet, which has created a seismic change in how the purchase and sale of such companies must be undertaken when they are reliant upon the world wide web.

For whereas there are many Internet-based companies that have enormous growth potential under the right direction, there are also all too many Internet-based companies that are being sold based on past financial performance, which is no longer capable of being achieved. Whether it is due to flaws in the business model coming to the surface and preventing the replication of past success, or it is the emergence of one's competition to overtake the company's business advantage and eat into their profitability. The challenge is discerning those companies with the potential for significant profit generation from those that are on their final legs.

Acquiring Technology

The acquisition of technology, whether through its outright purchase, licensing of that particular technology from its owners, or partnering with the owners, it is a process that demands considerable legal involvement to realize the objective goal of augmenting one's business. For where developing a particular technology is not possible, the alternative is purchasing that technology from a competitior, engaging them in a joint venture or licensing the application rights associated therewith.

Given the complexity and multiple dimensions associated with the acquisition of technology, it is essential that the entire scope of the technology acquisition be assessed and integrated into your existing business or its expansion into new avenues of revenue generation. Yet to realize its full potential, the underlying legal arrangements need to properly account for these aspects, while creating a framework through heightened profitability can be realized. That is a pivotal, yet understated, aspect of legal work with respect to the acquisition of technology.

Purchasing a Business Division

Purchasing a business division, as opposed to the entirety of a particular company, represents an interesting proposition. For in foregoing the entirety, so as only to seek to acquire a component part of the larger operation, it is necessary to effectively severe that portion that is critical to the purchasing company. This is a skilled operation that needs to be appropriately implemented, so as to obtain what is actual desired, have the ability to integrate this new concept into one's existing corporate operations and all at the right price.

This represents a challenge to any prospective buyer, yet with the right team of professionals (both internal and external to purchasing company), it is possible to significantly improve the resultant acquisition. Critical to this process is your lawyer, given that structuring and implementing the entire process is invariably a legal process, which alone is the realm of lawyers and their legal mechinations. And it is these mechinations that need to be put in place to so as to forge the effective purchase of the business division.

Buying a Website

Acquiring an operational website is a very unique form of business acquisition, which should be undertaken with due consideration of the highly specific nature of the website that is being acquired. For an operational website represents an integrated medium through which technology is being applied to achieve commercial results and messing around with the existing formula can have dire consequences for the acquiring party.

A critical consideration in the acquisition of an operational website is attaining the intellectual knowledge upon which the existing website owners are making it profitable. For it isn't necessarily the most obvious aspects of the particular website that makes it financially profitable, but aspects which the owners have identified and developed, which are critical to continue to make it a continuing commercial force.

At the same time, there are potential pitfalls associated with a particular website, due in large part to rapid transformations that are continually occurring on the Internet (from changes in search engine algorithims to competitive forces entering or upgrading their presence on the world wide web). As such, it is imperative that you seek to decipher these competing forces, together with the rationale for the website's vendor looking to sell. For the unfortunate reality is that currently successful website may be on the verge of a significant drop, which has prompted the website's sale and needs to be appropriately considered.

Domain Name Purchases

Dealing with your internet business from a legal perspective differs from traditional businesses, given the alteration in the business model from the traditional reliance upon fixed physical assets and location. Instead, your business is driven by its innovation and its capacity to attract a far more expansive customer base. The core of your business is derived from the underlying source code, which is the basis for a web-based business' corporate valuation. Thus transactions must correctly account for the unique nature of the business transaction, whether it entails launching, buying or selling an internet business, engaging in a joint ventures, contract negotiations or providing internet services to traditional businesses.

With the rapid evolution of the world wide web and e-commerce, professional advice must adapt and innovate to meet the rapidly changing dynamics of the internet. The direction and pace of the internet's development makes it exceedingly difficult to predict, as such it is important to attempt to stay ahead of the curve, which needs a solid understanding of the business and its internal operations. What we strive to provide is such advice, drawing from our own work seeking to optimize the profit potential of the internet and thereafter using that knowledge in our provision of business and legal advice.

Due Diligence

When it comes to undertaking due diligence with respect to an acquisition in the Internet or technology realm, such analysis can be exceedingly difficult and highly subjective. For unlike traditional business operations where there tended to be more precise quantitative and qualitative analysis available, together with less fluctuation and uncertainty over a specific time frame, internet and tech business are marked by incredible fluidity and untapped potential (including competitive developments), making due diligence and the assessment of those results far more challenging.

Nevertheless, this in should in no way impede, or otherwise prevent, appropriate due diligence from being undertaken. For intelligent research, analysis and scrutinizing of the target acquisition can provide critical information - be that information regarding undisclosed dangers and weaknesses in the underlying business, emerging competitive challenges, inefficiencies in the technology, alterations in the playing field or unrealized potential. Based upon the results of your due diligence, whether or not you proceed with the proposed acquisition, what price you offer and what other conditions you require, will largely be the product of said due diligence.

And for that particular reason, it is important that you are engaging the appropriate business lawyer, knowledge in technology and the internet's impact on purchase transaction, to assist yourself with initiating the due diligence process, analyzing the results and applying those results to the negotiation of the purchase arrangement.

Technology is moving forward at a rapid pace and it requires highly specific and specialized legal representation, which is capable of focusing on the advancement of your internet business. As such for your internet business' legal, transactional and contractual legal needs, contact us at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.