How can an asset purchase help your company to grow while preventing exposure to contingent liabilities? Why do you need an attorney for a business asset purchase transaction?
What is a Business Asset Purchase?
An asset purchase contract or agreement is used to purchase the assets, real estate, customers, intellectual property, equipment, inventory or real estate of another company without exposing your business to additional liabilities associated with the seller. An asset purchase allows you to target the specific assets you need to acquire to expand your own opportunities and move forward with profitable business.
The business asset purchase transaction is quite common in San Diego and Southern California. A successful asset purchase can help your company to grow by identifying the specific assets you need while ensuring the completion of a transaction which passes clear title to the asset(s) without risk of contingent liabilities.
This is why it is so important to work with the experienced mergers and acquisitions attorneys at the Watkins Firm. Each specific unique asset must be clearly identified, evaluated and researched for encumbrances or contingent liabilities associated with the seller.
A successful asset purchase contract identifies the specific assets, their identifying (serial) number(s), the specific condition of the asset and any other unique details associated with the asset or it’s unique condition. The asset(s) must be analyzed to identify ownership and if any of the assets to be acquired are encumbered by an outside or financial interest. How will the asset’s basis, depreciation, future amortization and any available tax credits be established or recaptured? Are there any issues of licensure or permits which cannot be transferred? How will clear title to the asset(s) be clearly transferred to the buyer? Are there any assumptions of existing financing or releases which must be obtained from third parties to protect the buyer from future litigation?
A successful asset purchase transaction provides fewer risks for the buyer as well as potential tax advantages.
In Some Cases The Goal Cannot Be Accomplished Without a Stock Purchase
When it comes to acquiring part or all of another business, a competitor or a division of a corporation who may be downsizing there are two primary tools: an asset purchase agreement and a stock purchase agreement. A stock purchase agreement is used to purchase an entire company. This vehicle may be required when you wish to take over every aspect of the target business including existing government contracts, subsidiaries and employees. The disadvantage of a stock purchase is that you also must assume all debts and known and contingent liabilities of the company you acquire.
Stock purchase transactions are much more legally and financially complex and require extensive due diligence in order to protect our client’s interests. This additional exposure may not be necessary if you only need to purchase specific assets to accomplish your business goals.
A Successful Asset Purchase Starts with a Proven M & A Attorney at the Watkins Firm
The experienced mergers and acquisitions attorneys at the Watkins Firm have more than four decades of experience advising our business clients in all aspects of buying part or all of a business, as well as selling your company. We help you to negotiate a successful asset purchase contract and perform due diligence to ensure that you know exactly what you are acquiring, any encumbrances that you would assume and that you receive clear title to those assets as part of the transaction.
If you are considering an asset purchase, a stock purchase, a joint venture or merger we invite you to review our Recent Podcast Episode 13 – Mergers and Acquisitions as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
