Is an asset purchase better than a stock purchase here in San Diego and Southern California? An asset purchase agreement can be a better strategy than a stock purchase in some mergers and acquisitions scenarios. The advantage of an asset purchase agreement is simple: you buy specific assets and limit your exposure to liability.
What Does an Asset Purchase Transaction Accomplish?
An asset purchase transaction allows your company to buy the vehicles, real estate, manufacturing equipment, customer bases or other assets of a competitor or national corporation, without assuming the risks and contingent liabilities required in a stock purchase.
An effective asset purchase agreement must clearly describe the item(s) to be conveyed as part of the agreement, as well as a substantial description and statement of condition. The seller should disclose all known defects, problems or challenges associated with each asset to be purchased. In addition, due diligence should be carefully undertaken to ensure there are no other financial encumbrances which would remain attached to the asset while ensuring the seller has the clear right to provide clear title to the buyer. These situations make an asset purchase better than a stock purchase.
The attorneys at the Watkins Firm have decades of expertise and experience structuring mergers and acquisitions. We help our clients to achieve the growth they desire without exposing themselves needlessly to unnecessary risk or contingent liabilities. Our asset purchase agreement will ensure that you receive clear title to the specific assets you wish to acquire without exposing yourself or your company to the liabilities of the seller, and any lawsuits they may be facing.
When is a Stock Purchase Necessary or Required?
Stock purchase strategies require you to accept responsibility for a corporation’s debts and any contingent liability that may be in existence. There are times where this may be required, such as deals that involve government contracts or intellectual property. Issues with existing creditors can complicate the transaction of a company’s assets. Stock purchase transactions are generally better for the seller from a taxation and liability point of view.
Stock purchase transactions can also help to “mask” the acquisition in the marketplace and even with customers and employees. The due diligence associated with a stock purchase is much more legally and financially complex than an asset purchase.
Is an Asset Purchase Better Than a Stock Purchase – How Will You Know
Is an asset purchase better than a stock purchase for your unique business circumstances? How will you know? This is why it is important to work with San Diego business and mergers and acquisitions attorneys with more than four decades of experience. We provide sound insight and guidance to help our clients make the best decisions for their company now and in the future.
If you are interested in acquiring a competitor, or perhaps purchasing part of a major corporation that is no longer in harmony with their primary business goals we invite you to review our Podcast Episode 13 – Mergers and Acquisitions and the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
