When you sell out of home assets, you make reps and warranties to the buyer.  There are two approaches.

Full reps and warranties

This is the best way to get top price for your out of home assets.  Sellers will pay more if you agree to this long list of representations.   You represent and warranty that you:

• Have valid title to assets.
• Are authorized to sell the assets.
• Have valid title to the assets you are selling
• Are in compliance with all laws.
• Have valid permits (usually listed)
• Own your billboards and that they are in good repair
• Have valid title to any license or intangibles you use in your business.
• Have valid ad contracts (usually listed).
• Have disclosed any liabilities which you are expecting the buyer to assume.
• Have files your taxes timely.
• Have no environmental liabilities
• Have disclosed all information which might have a material adverse impact on the assets you are selling.

You need to take reps and warranties seriously.  Sometimes there is a holdback of 5-10% of the purchase price from which can be used to offset any undisclosed cost or liabilities.  An incorrect rep or warranty could mean a lawsuit if the buyer is damaged.

As-is, where-is

This approach is helpful if you are winding up your company and do not want to have to keep the company open through a lengthy post acquisition period.    The idea here is that you ask the seller to conduct all of their due diligence to form their estimate of the quality of your assets.  At closing you represent only that you:

• Have valid title to the asset your are selling.
• Have authority to bind the selling entity.

Here is the sort of limitations language which might be in an as-is, where-is sale.

Buyer acknowledges it has been given ample time and full access to (i) physically inspect the Billboard  Structures, (ii) read and review all documentation relating to the Billboard Structures, the Permits, the Customer Agreements and all other material agreements under which the Billboard Structures are operated, and (iii) ask questions of and obtain information from the General Manager of Seller. Buyer confirms that it has conducted and is satisfied with the results of its due diligence investigation. Buyer acknowledges that Seller (nor anyone on Seller’s behalf) has not made, does not make and hereby specifically disclaims any representations, warranties, promises, covenants, agreements or guaranties of any kind or character whatsoever, whether express or implied, oral or written, past, present or future with respect to:

                        (i)         the value, nature, quality, physical or any other condition of the Billboard Structures;

                        (ii)        the suitability of the Billboard Structures, the Permits, the Leases or the Customer Agreements for any and all activities and uses which Buyer may or plans to conduct therewith including without limitation the visibility of the Billboard Structures to vehicular traffic or the presence of trees or other obstructing vegetation;

                        (iii)       the compliance of or by the Billboard Structures or its operation with any laws, rules, ordinances, orders, decisions or regulations of any applicable governmental authority or body;

                        (iv)       the merchantability, marketability or fitness for a particular purpose of the Billboard Structures, the Permits, the Leases or the Customer Agreements;

                        (v)        the manner or quality of the construction of or the materials incorporated into the Billboard Structures;

                        (vi)       the manner, quality, state of repair or lack of repair of the Billboard Structures;

                        (vii)      the legal effectiveness or Seller’s compliance with the terms and conditions of the Permits, the Leases or the Customer Agreements; and

                        (viii)      any other matter with respect to the Billboard Structures, the Permits, the Leases or the Customer Agreements.

Seller expressly acknowledges and agrees that the Purchase Price was negotiated and set with the understanding that the Billboard Structures, the Permits, the Leases and the Customer Agreements would be sold with no representations or warranties other than as expressly set forth in Sections 5 (a) and (b) above.

As-is, where-is reduces the number of buyers and will mean a lower price for assets.

Whichever way you are thinking of going, consulting with a knowledgeable attorney is a great place to start.

Have you ever purchased assets on an as-is, where-is basis?  What’s been your experience?  Email davewestburg@billboardinsider.com and we’ll run a followup post

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