How can our experienced mergers and acquisitions attorneys protect your business interests? What is the best strategy to accomplish your goals and objectives for the transaction? The Watkins Firm has more than four decades of experience in San Diego and Southern California mergers, asset purchase transactions, stock purchase acquisitions, and helping business owners to sell the company they’ve worked so hard to build.
Stock Purchase or Asset Purchase?
What is the difference between a stock purchase and an asset purchase as a mergers and acquisitions strategy? Generally speaking, an asset purchase allows the buyer to acquire specific business or corporate assets from the seller. A stock purchase transaction allows the buyer to “step into the shoes of the seller” with the acquisition of an entire company or controlling interest in a business or corporation. Each form of transaction carries a blend of risks and benefits for buyers and sellers alike.
Asset Purchase Transactions
Our Watkins Firm experienced mergers and acquisitions attorneys protect your business interests at every step of an asset purchase. Asset purchase transactions occur when your company is acquiring specific assets from another business. Assets which can be acquired in this form of purchase include but are not limited to:
- Vehicles
- Equipment
- Real Estate
- Inventory
- Machinery
- Fixtures
- Licenses
- Intellectual property and trade names
- Even Customers as well as accounts receivable and payable
An asset purchase provides some tax advantages for the buyer, however there are substantial risks associated with these transactions. Principle issues in these transactions include a detailed understanding of the actual asset(s) to be purchased including condition, unique identifies such as serial numbers, and clear title. The risks of an asset purchase include existing encumbrances, contingent liabilities and the risk of litigation from creditors of the seller. As in any M & A transaction, due diligence and carefully crafted transactional documents and contracts are the key to a successful asset purchase.
Stock Purchase Acquisitions
How can a stock purchase agreement protect your business interests while allowing you to acquire the company or business you intend to buy? What are the perspectives of the “buyer” and the “seller” in these transactions?
The advantage of a stock purchase is it transfers ownership or controlling interest in a company from the seller to the buyer. You don’t have to go to the time and expense of creating separate UCC agreements or descriptions of individual assets or negotiate with creditors to release encumbrances. The seller may enjoy a lower tax rate on the proceeds of the sale and has an incentive to ensure a smooth transition to the buyer’s management team.
Our experienced mergers and acquisitions attorneys protect your business interests with sound counsel and thorough due diligence. There are substantive and potentially risk-laden issues relating to outstanding loans and liabilities, as well as future disputes and contingent liabilities that may be unforeseeable at this point. There are risks associated with employees, product liabilities, customer transition and all outstanding financial debts and obligations.
A well crafted stock purchase contract agreement should balance the desires of the seller to close the transaction and move on, with the risks assumed by the buyer and the ability to lay unforeseen costs and liabilities back upon the seller prior to final reconciliation.
The buyer should be concerned with these present and future risks and liabilities. There should also be a careful analysis of the transaction from a tax perspective to ensure the “basis” for the new acquisition will not be stepped up to an unmanageable level. There may be specific governmental or other contracts that the buyer wishes to preserve.
The stock purchase allows the buyer to “step into the shoes” of the seller preserving all existing relationships, contracts and hopefully the book of business itself. There are issues concerning the seller’s impact on Goodwill and there is usually a transition period where the seller remains somewhat active in the ongoing operations of the business. This is phased out over a specified period of time where the transaction is ultimately concluded and final accounting is completed.
Watkins Firm Experienced Mergers and Acquisitions Attorneys Protect Your Business Interests
Your Watkins Firm experienced mergers and acquisitions attorneys protect your business interests while providing sound advice and counsel throughout your M & A project.
How can our thorough proprietary due diligence checklists and process and extensive experience in stock purchase and asset purchase transactions quantify and reduce risks while facilitating the growth you seek? If you are considering an asset purchase, stock purchase, merger or acquisition it is important to make sure you understand every aspect and implication of the transaction. We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
