Buying or Selling a Manufacturers' Rep Agency in MN

What Makes Selling a Rep Agency Different From Selling Another Business?

A rep agency sells access: its value is its contracts with principals and its relationships with the customers who buy those principals’ products. In my experience, the line contracts typically give each principal a right to end the agreement or to consent to any sale or change of ownership, so the buyer is paying for relationships that a third party can veto.

Minnesota’s sales representative statute defines a sales representative as a person who “contracts with a principal to solicit wholesale orders and who is compensated, in whole or in part, by commission” (Minn. Stat. § 325E.37, subd. 1(d)). An independent rep agency that solicits wholesale orders and is paid by commission fits that definition unless it is a person who “(1) is an employee of the principal; (2) places orders or purchases for the person’s own account for resale; (3) holds the goods on a consignment basis for the principal’s account for resale; or (4) distributes, sells, or offers the goods, other than samples, to end users, at retail” (subd. 1(d)). The statute’s definition of “person” includes corporations and other entities.

Three features follow from that business model:

1. The transition takes years. The seller introduces the buyer to each principal and each key customer, and the principals watch how the buyer performs before they commit.
2. The price depends on the future. Commission income can disappear if a principal ends a line, so buyers resist paying full value up front and sellers are often paid over time.
3. Disputes after closing are predictable. The buyer may say the relationships were weaker than represented, and the seller may say the buyer let a relationship slip.

I have represented both manufacturers and reps in these transactions and have appraised rep agencies.

How Does the Minnesota Termination of Sales Representatives Act Affect a Sale?

For a covered agency, a principal may terminate the rep agreement only with good cause and written notice, and in most cases only after the agency has had a chance to cure; good cause includes a material breach of the written agreement. A decision not to renew falls under a separate written-notice rule. So the line contract’s assignment and change-of-control terms decide how much room a sale gives each principal to end the line.

Under Minn. Stat. § 325E.37, subd. 2(a), “A manufacturer, wholesaler, assembler, or importer may not terminate a sales representative agreement unless the person has good cause and” two things happen. The principal must have “given written notice setting forth the reason(s) for the termination at least 90 days in advance of termination,” and the rep must fail “to correct the reasons stated for termination in the notice within 60 days of receipt of the notice.” Good cause “means a material breach of one or more provisions of a written sales representative agreement governing the relationship with the manufacturer, wholesaler, assembler, or importer” (subd. 1(b)); without a written agreement, it is the rep’s failure to substantially comply with the principal’s material and reasonable requirements. The cure period does not always apply. Under subdivision 2(b), a termination notice “is effective immediately upon receipt” when the grounds are one of six listed reasons, one of which is “assignment for the benefit of creditors or similar disposition of the assets of the sales representative’s business” (subd. 1(b)(2)).

Nonrenewal follows subdivision 3. Unless the nonrenewal is for good cause and the rep has failed to cure, “no person may fail to renew a sales representative agreement unless the sales representative has been given written notice of the intention not to renew at least 90 days in advance of the expiration of the agreement.” For an agreement with no fixed end, subdivision 3 provides that “a sales representative agreement of indefinite duration shall be treated as if it were for a definite duration expiring 180 days after the giving of written notice of intention not to continue the agreement.” Check the current statute text for these notice periods.

The Act does not name a sale of the agency among its examples of good cause. What it means for a seller: if a line contract bars assignment or a change of control without the principal’s consent, closing without that consent can give the principal a claimed material breach. My legal research did not identify a Minnesota decision on whether an ordinary sale of an agency’s assets is a “similar disposition” that skips the cure period, so an asset seller should not count on that period. I suggest reading each manufacturer representative agreement for its assignment and change-of-control clause, and for its term and renewal provisions, before the price is set, because those terms decide which principals can claim a breach from the sale and when each agreement comes up for renewal.

The Act reaches an agency that “is a resident of Minnesota or maintains that person’s principal place of business in Minnesota,” or “whose geographical territory specified in the sales representative agreement includes part or all of Minnesota” (subd. 6(a)). A principal cannot contract around the Act. Subdivision 7 bars a term that includes or purports to include “(1) an application or choice of law of any other state; (2) a choice of venue in any other state; or (3) a waiver of any provision of this section.” Any such term is “void and unenforceable.” Subdivision 7 “applies to sales representative agreements entered into, renewed, or amended on or after” August 1, 2014 (Laws 2014, chapter 165, section 1). Its venue clause applies to agreements “entered into, renewed, or amended after” August 1, 2022 (Laws 2022, chapter 51, section 1). For an older agreement, the Court of Appeals has enforced a rep agreement’s choice of North Carolina law against a Minnesota rep’s claim under the Act. In Hagstrom v. American Circuit Breaker Corp., 518 N.W.2d 46 (Minn. App. 1994), the court wrote, “We agree that the contractual choice of law is enforceable, and we affirm.” For an agency outside that reach, the line contract and the law that governs it decide. I suggest making each principal’s written consent, or a new agreement between the principal and the buyer, a condition of closing, because the price assumes the lines stay.

How Are Manufacturers’ Rep Agencies Valued?

A rep agency is generally priced as a multiple of its annual commission revenue or profit. The multiple rises with the strength and length of the principal and customer relationships, whether noncompetes are in place, the agency’s size, and the outlook for future sales.

An appraisal price is generally based on annual sales or profits multiplied by one to five years, depending on those factors. In the video above, I give a simpler starting point: about a year to a year and a half of revenue, before those factors adjust the price. Appraisals are not precise. Two appraisers can be far apart, and one using a multiple of 2 while another uses a multiple of 4 doubles the price. An outside appraisal can still give both sides a starting point for negotiation. For how appraisers approach a closely held company generally, see business appraisal.

What the buyer is paying for is mostly intangible. Federal tax law describes a customer-based intangible as “any other value resulting from future provision of goods or services pursuant to relationships (contractual or otherwise) in the ordinary course of business with customers” (26 U.S.C. § 197(d)(2)(A)(iii)). A rep agency has few hard assets, so a seller can raise the price by shifting risk to itself: taking part of the price as a share of future commissions, which ties the seller’s payout to whether the lines stay.

What Are the Ways to Structure a Rep Agency Sale?

A rep agency can be sold as a stock sale, where the buyer acquires the agency entity and its contracts stay in place, or as an asset sale, where each contract must be assigned to the buyer’s company. Many rep agency deals also spread the ownership transfer over several years.

In a stock sale, the contracting party on each line contract does not change, but a change-of-control clause can still require the principal’s consent. In an asset sale, each line contract moves only as far as its own terms and Minnesota law allow, so assignment terms matter even more. Under Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267 (Minn. 2004), “Contract rights are generally assignable, except where the assignment is (1) prohibited by statute; . . . (2) prohibited by contract; (3) or where the contract involves a matter of personal trust or confidence,” so a line contract that says nothing about assignment can still fall within that last exception. For the general tradeoffs in liabilities and taxes, see stock sale versus asset sale in Minnesota.

Timing is the decision specific to rep agencies. I have seen many deals where the buyer pays over five years and the shares transfer with the final payment, with the principal giving consent at that point, after years of working with the buyer as its main contact. I have also seen the shares transfer at the start, with the principal signing off at closing, and hybrids of the two. When part of the price depends on commissions after closing, the terms work like an earnout in a Minnesota business sale. If the agency is an S corporation and the buyer is a company rather than an individual, a share transfer can end the S election: an S corporation may not “have as a shareholder a person (other than an estate, a trust described in subsection (c)(2), or an organization described in subsection (c)(6)) who is not an individual” (26 U.S.C. § 1361(b)(1)(B)), and the election “shall be terminated whenever” the corporation “ceases to be a small business corporation” (26 U.S.C. § 1362(d)(2)).

When an agency has several owners, their interests can diverge: one may want a quick exit at a discount, and another may want the highest total paid over time. The agency’s own documents may also limit the sale. Under Minn. Stat. § 302A.429, subd. 1, a corporation may restrict share transfers “in the articles, in the bylaws, by a resolution adopted by the shareholders, or by an agreement among or other written action by a number of shareholders.” “A restriction is not binding with respect to securities issued prior to the adoption of the restriction, unless the holders of those securities are parties to the agreement or voted in favor of the restriction” (subd. 1). A written restriction that is not manifestly unreasonable and is “noted conspicuously on the face or back of the certificate,” or included in the information sent to holders of uncertificated shares, “is valid and specifically enforceable against the holder of the restricted securities or a successor or transferee of the holder” (subd. 2). Without that notation or that information, a restriction “is ineffective against a person without knowledge of the restriction” (subd. 2). An agency organized as an LLC looks to its operating agreement, and where that agreement is silent, to Minnesota’s LLC statute. Under that statute, a transfer of a member’s transferable interest “does not entitle the transferee to” “participate in the management or conduct of the company’s activities” (Minn. Stat. § 322C.0502, subd. 1). The buyer becomes a member “as provided in the operating agreement,” through a merger or similar transaction under the statute, or “with the consent of all the members” (Minn. Stat. § 322C.0401, subd. 4).

Statutes also require owner approval of an asset sale. A Minnesota corporation’s sale of “all or substantially all of its property and assets, including its good will, not in the usual and regular course of its business” needs a board vote and approval “by the affirmative vote of the holders of a majority of the voting power of the shares entitled to vote” (Minn. Stat. § 302A.661, subd. 2(a)). “Written notice of the meeting shall be given to all shareholders” (subd. 2(a)). Shareholder approval is not required if the corporation “retains a significant continuing business activity” after the sale (subd. 2(b)). In an LLC whose operating agreement does not say otherwise, the same sale needs “the consent of all members” (Minn. Stat. § 322C.0407, subds. 2(4), 3(4)(i); Minn. Stat. § 322C.0110, subd. 2).

What Should a Letter of Intent Cover in a Rep Agency Deal?

A letter of intent for a rep agency should state the price, the structure, the payment schedule, how principal consent will be handled, and which promises bind now. In Minnesota, a letter of intent that expressly disclaims binding effect is not a contract, and a promise inside that disclaimer does not create a separate contract either.

In Hansen v. Phillips Beverage Co., 487 N.W.2d 925 (Minn. App. 1992), buyers signed a letter of intent to purchase a liquor and wine distributor. The deal ended after one of the distributor’s largest suppliers “did not approve of appellants as distributors of Beam products in North Dakota.” The letter stated it was not binding, and it also said the parties would stop negotiating with other buyers. The Court of Appeals affirmed summary judgment for the seller: “We hold that the parties were not bound contractually by the letter of intent which expressly disclaimed any contract liability. The disclaimer applied to the entire letter and no contract arose from an individual sentence indicating agreement.”

The facts track a rep agency sale closely, because a supplier’s approval decided the deal. I suggest stating separately, outside any nonbinding disclaimer, the promises the parties intend to bind before closing, such as confidentiality and exclusivity, because Hansen read a disclaimer covering the whole letter to reach those promises too. For more on when Minnesota courts hold a letter binding, see when a letter of intent binds in Minnesota.

What Does Due Diligence on a Rep Agency Involve?

Due diligence on a rep agency centers on the line contracts and the commission history behind the price. A buyer should also confirm who gets commissions on orders written before closing and whether the seller has state tax liens that would follow the assets.

A buyer’s list should include the following, because each item bears on whether the commission income will continue:

• Each line contract, with its term, termination, assignment, and change-of-control provisions, and any history of disputes with the principal.
• Commission statements by principal and by customer, to see concentration: an agency earning most of its income from one line carries more risk than one spread across several.
• Employee and sub-rep agreements, including any nonsolicitation and confidentiality terms the buyer will rely on.
• The seller’s tax status, including any lien filed by the Department of Revenue.

Pipeline commissions need a rule in the purchase agreement. If a principal ends a line, the Act entitles the rep “to be paid for all sales as to which the representative would have been entitled to commissions pursuant to the provisions of the sales representative agreement, made prior to the date of termination of the agreement or the end of the notification period, whichever is later, regardless of whether the goods have been actually shipped” (Minn. Stat. § 325E.37, subd. 4). The rep may enforce the Act through arbitration, where the arbitrator may award “payment of commissions due under subdivision 4” (subd. 5(b)(3)), or in court at the rep’s option (subd. 5(a)), and “To be effective, any demand for arbitration under subdivision 5 must be made in writing and delivered to the principal” by the deadline in subdivision 6(b). Because orders written before closing can pay after it, the purchase agreement should say whether those commissions belong to the seller or the buyer. For the commission rules themselves, see sales rep commissions after termination.

State taxes can follow the assets. A sale of “more than one-half of all the property of a business” outside the ordinary course is a transfer in bulk (Minn. Stat. § 270C.57, subd. 1(h)). When “an enforceable lien for unpaid taxes has been filed against the business by the commissioner,” subdivision 2(a) requires that “at least 20 days before taking possession of the assets or paying the purchase price, the successor shall notify the commissioner of the transfer and the terms and conditions related to it.” “The notice must include the tax identification number of the transferring business” (subd. 2(a)). Once a transfer agreement is signed, the duty is narrower: “If an agreement to transfer has been entered into, this notice requirement only applies: (1) if a lien described under this paragraph has been filed prior to the date of the agreement; or (2) if the date of the transfer is more than 30 days after the date of the agreement, and a lien described under this paragraph is filed at least 30 days prior to the date of transfer.” A buyer who does not give a required notice “is liable for any unpaid taxes, interest, and penalties due from the transferring business to the extent of the purchase price” (subd. 2(b)). For a buyer related to the seller, “a rebuttable presumption arises that the transaction is not at arm’s length” (subd. 1(f)), and if the commissioner determines a transfer “was not at arm’s length or was a gift, the successor’s liability under this section equals the value of the assets transferred” (subd. 2(c)). Notice does not release the lien amounts. If the commissioner answers the notice with other liabilities, the successor is, “in addition to being liable for the amounts included on the lien, liable for all other uncontested taxes, interest, and penalties as stated in the commissioner’s notice from the transferring business to the extent of the purchase price if the successor pays the purchase price or takes possession of the assets without withholding and remitting the liability to the commissioner” (subd. 2(b)); if the commissioner sends no notice in time, “the successor is not liable for any taxes of the transferring business other than those included on the lien” (subd. 2(e)). Tax here “means sales, withholding, and any tax imposed by chapter 296A” (subd. 1(i)). Check the current statute text for the notice period. I suggest a lien search against the agency before signing, because the notice duty turns on whether a lien has been filed. Other liabilities that can follow an asset buyer are covered in successor liability in an asset sale, and the seller’s promises about the business belong in the representations and warranties.

A buyer that shares ownership or management with the seller can also take over the seller’s unemployment-insurance experience rating history. Under Minn. Stat. § 268.051, subd. 4(a)-(b), all or part of that history transfers when a taxpaying employer acquires all or part of another’s “organization, trade or business, or workforce” and “there is 25 percent or more common ownership or there is substantially common management or control between the predecessor and successor.” Common ownership “includes ownership by a spouse, parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece, nephew, or first cousin” (subd. 4(d)). “Each successor employer must notify the commissioner of the acquisition by electronic transmission, in a format prescribed by the commissioner, within 30 calendar days of the date of acquisition” (subd. 4(e)). Check the current statute text for that period.

How Do Noncompetes Work When a Rep Agency Is Sold?

Minnesota voids covenants not to compete between employers and employees, but a temporary, geographically restricted covenant agreed upon during the sale of a business can keep the seller from competing. The agency’s own salespeople are another matter: noncompetes signed with them on or after July 1, 2023, are void, so the buyer relies on nonsolicitation and confidentiality terms.

Minn. Stat. § 181.988, subd. 2(a), states: “Any covenant not to compete contained in a contract or agreement is void and unenforceable.” The statute defines a covenant not to compete as “an agreement between an employee and employer that restricts the employee, after termination of the employment, from performing” listed kinds of work (subd. 1(a)). The sale exception in subd. 2(b)(1) applies when “the covenant not to compete is agreed upon during the sale of a business,” and allows “a temporary and geographically restricted covenant not to compete that will prohibit the seller of the business from carrying on a similar business within a reasonable geographic area and for a reasonable length of time.” The ban took effect July 1, 2023, and applies to agreements entered into on or after that date (Laws 2023, chapter 53, article 6, section 1).

What it means for a seller: the buyer can bar you from repping competing lines in the agency’s territory for a reasonable time, and a covenant tied to the actual territory and product lines is easier to defend than a broad one. Because the statute defines an employee as “any individual who performs services for an employer, including independent contractors” (subd. 1(c)), I suggest placing the seller’s covenant in the purchase agreement, where the sale exception applies by its terms, rather than only in a later consulting agreement.

What it means for a buyer: the ban covers the agency’s salespeople and its individual sub-reps, because the statute defines an independent contractor as “any individual whose employment is governed by a contract and whose compensation is not reported to the Internal Revenue Service on a W-2 form,” and it reaches a sub-rep’s entity “when an employer requires an individual to form such an organization for purposes of entering into a contract for services as a condition of receiving compensation under an independent contractor agreement” (subd. 1(d)). Their noncompetes entered into on or after July 1, 2023, do not protect the purchase. The statute excludes other protections from the ban: “A covenant not to compete does not include a nonsolicitation agreement, or agreement restricting the ability to use client or contact lists, or solicit customers of the employer” (subd. 1(a)). Those agreements, and the confidentiality agreements the same subdivision excludes, are the ones to review in due diligence.

What Tax Rules Shape the Price and Payment Terms?

In an asset sale, a written allocation of the price among the assets binds both buyer and seller for federal tax purposes, and the buyer generally amortizes the goodwill and customer relationships it buys over 15 years. In an asset or a stock sale, the buyer amortizes the seller’s noncompete over 15 years. A seller paid over several years generally reports the gain as payments arrive, with exceptions for recapture income and some sales to related buyers.

Under 26 U.S.C. § 1060(a), “If in connection with an applicable asset acquisition, the transferee and transferor agree in writing as to the allocation of any consideration, or as to the fair market value of any of the assets, such agreement shall be binding on both the transferee and transferor unless the Secretary determines that such allocation (or fair market value) is not appropriate.” Buyer and seller can prefer different allocations, so the allocation should be negotiated with the price, not after it. Both sides must also report the allocation: under 26 U.S.C. § 1060(b), “the transferor and transferee in an applicable asset acquisition shall, at such times and in such manner as may be provided in such regulations, furnish to the Secretary” the amount allocated to section 197 intangibles and any modification of that amount.

For an asset buyer, goodwill, customer-based intangibles, and “any covenant not to compete (or other arrangement to the extent such arrangement has substantially the same effect as a covenant not to compete) entered into in connection with an acquisition (directly or indirectly) of an interest in a trade or business or substantial portion thereof” are amortized “ratably over the 15-year period beginning with the month in which such intangible was acquired” (26 U.S.C. § 197(a), (d)(1)(E)). A stock buyer amortizes the noncompete the same way, but the shares themselves are not a section 197 intangible, because the statute excludes any interest “in a corporation, partnership, trust, or estate” (§ 197(e)(1)(A)). The deduction also has an exception for older agencies sold to related buyers. Goodwill and going concern value are not amortizable if, among other cases, “the intangible was held or used at any time on or after July 25, 1991, and on or before such date of enactment by the taxpayer or a related person” (§ 197(f)(9)(A)). The code’s editorial note gives that enactment as one “approved Aug. 10, 1993.” How much of the total is paid as purchase price and how much as consulting fees also changes each side’s taxes.

For the seller, an installment sale is “a disposition of property where at least 1 payment is to be received after the close of the taxable year in which the disposition occurs,” and its income is generally “taken into account . . . under the installment method” (26 U.S.C. § 453(a), (b)(1)). That deferral has limits. Under § 453(i)(1), “any recapture income shall be recognized in the year of the disposition.” In “an installment sale of depreciable property between related persons,” § 453(g)(1) provides that, apart from certain contingent payments, “all payments to be received shall be treated as received in the year of the disposition.” That rule does not apply if “it is established to the satisfaction of the Secretary that the disposition did not have as one of its principal purposes the avoidance of Federal income tax” (§ 453(g)(2)). Any “amortizable section 197 intangible shall be treated as property which is of a character subject to the allowance for depreciation provided in section 167” (§ 197(f)(7)), and § 1239(a) treats a seller’s gain on a sale to a related person as “ordinary income” when the property is depreciable in the buyer’s hands. Related persons are defined in 26 U.S.C. § 1239(b). When a seller who owns 10% or more of the agency sells an interest and, in connection with that sale, “enters into an employment contract, covenant not to compete, royalty or lease agreement, or other agreement with the transferee,” the owner and the buyer must furnish the information the IRS requires (26 U.S.C. § 1060(e)(1)).

How Can a Seller Paid Over Time Protect the Payments?

A seller who finances part of the price should hold security for it: a lien on the agency’s assets or a pledge of its shares, personal guarantees from the buyer’s owners, regular commission reporting, and a right to take the agency back on default. In a deal where the shares transfer only with the final payment, the seller keeps ownership until paid.

The risk is concrete. Commission income depends on principals the seller does not control, and a buyer who loses a line may stop paying. As I describe in the video, buyers often feel the business was not what they expected, and sellers often feel the buyer is not working the lines as hard as they did. Clear reporting and default terms give both sides an agreed way to measure performance.

Before accepting a note, I suggest the seller check the buyer’s creditworthiness, and if the buyer pays partly in its own shares, investigate the buyer as carefully as the buyer investigates the agency. A lien on business assets is created and perfected under Article 9 of the Uniform Commercial Code; see security interests under Article 9.

What Does My Video on Buying and Selling a Rep Agency Cover?

The video above answers five questions: how to buy or sell a manufacturers’ rep agency, what a buyer and a seller should each know, what is unique about a rep agency sale, how to structure the transition, and how to appraise the agency. My transcript follows.

Related resources: the one-page rep agency buy and sell checklist (PDF), my second video, Sell Your Rep Business, and the Manufacturers’ Agents National Association presentation Succession Planning and Valuing/Buying/Selling/Merging Rep Firms (PDF).

How to buy or sell a manufacturers’ rep agency?

Today we’re talking about best practices for buying and selling a manufacturer’s rep agency. What should you know as a buyer? What should you know as a seller? Now this video hits at a real high level. See the description below for a link to my article on this aaronhall.com, and you can see a lot of best practices and pitfalls to watch out for.

Now there are some interesting issues that are somewhat unique to selling or buying a manufacturers rep agency as opposed to other businesses out there. First off, a manufacturers’ representative agency has one or more manufacturers who are principals, and typically the agreement with those principals is the principal has a right to terminate the agreement, or to at least consent if there’s any sort of sale or transfer of ownership. So, that’s an important piece.

Second, typically this transition is not instantaneous. It takes a number of years. The seller wants to help the new sales rep who’s buying the agency get familiar with the customers or the clients, and build that trust and rapport with them. Likewise, build the trust and rapport with the principal, the manufacturer. So typically, you have a multiple year handoff.

Now, there are a lot of different ways to structure this. The first question is, “When does the ownership transfer?” Does it transfer at the beginning of a multiple year transition? Does it transfer over time? Or does it transfer at the end? For example, I’ve seen many deals where the buyer will pay for five years, and upon making the final payment, the shares transfer to the buyer. And a principal, the manufacturer, will give consent at that time. And by that time, the principal has already gotten to know the buyer so well, because for years the buyer has been their main point of contact. The principal feels very comfortable with that. Conversely, I’ve seen where the buyer gets the shares right away, the principal signs off on the deal, or a hybrid of that.

Now, another important part of this is the seller wants to make sure they get paid. The buyer wants to make sure that they have a revenue stream, a profit stream coming in, and that it’s as good as the seller purports that it is. One problem that often comes up is buyers remorse. The buyer says, “The business wasn’t in the condition I expected. I assumed the relationships were better, I assumed the manufacturer or the clients were better, or there would be higher volume.” Conversely, sellers often say, “Hey look, the buyer isn’t working as hard as I was, or as effectively as I would, or the buyer did something wrong, or the buyer hurt the relationship with the principal.” So there’s a lot of potential for problems to arise here.

Other complexities that come up is you may have multiple owners in the manufacturer’s rep agency selling to another generation, a new set of owners, maybe one or more. And so, you have to think through, “What does that buyout look like?” And often, there are different competing interests of the sellers. Some want to just get out and they’re willing to take a discount. Others want to get paid over time and they’re most interested in maximizing what they’re paid over a five year period. That raises the question of, “How do you appraise the business?”

I can’t get into all the details, but the simple version is that you typically look at a period of revenue, maybe a year, maybe a year and a half, and that would be perhaps the sale price, but a lot of things will affect that. How strong is the relationship with the principal? And with the clients or customers? The stronger the relationship, the more people are locked in for years, the greater the sale price.

Planning a Rep Agency Sale or Purchase

A rep agency sale turns on the line contracts. Before the price is set, I suggest reading each contract’s assignment and change-of-control terms, because those terms decide which lines will transfer. I also suggest deciding whether ownership moves at closing or over time and planning how each principal will consent, because a line contract often lets the principal end the agreement or approve any change of ownership. The seller’s noncompete, the pipeline commission split, the price allocation, and the seller’s security should then go in the purchase agreement, where Minnesota’s sale exception and the federal allocation rule apply.

If you are buying or selling a rep agency and want to know how these rules apply to your line contracts and price, email [email protected] with a brief description, and I can start an intake and conflict check before you send any confidential documents. More on how I handle these deals is on my business acquisitions and sales page.