Are you acquiring a business or it’s assets? Do you need an asset purchase or a stock purchase to complete the transaction at hand, and an which one is the better vehicle? They are two completely different business acquisition strategies, and they are employed to accomplish differing objectives.
What is the Primary Difference Between an Asset Purchase and a Stock Purchase
The primary difference is the extent of the liability that passes from the seller to the buyer, as well as the ability to continue existing government contracts and use of trade names and intellectual property. In an asset purchase, the acquisition is limited to specific identifiable assets. A stock purchase allows one to take a position within the company or ownership of the company itself.
Do You Need an Asset Purchase or Stock Purchase to Accomplish Your Objectives?
Do you need an asset purchase or stock purchase to accomplish your objectives in the transaction at hand?
Asset purchases are much more specific contracts, generally speaking. They are used to convey specific business assets, customers, inventory, real estate, vehicles, property, materials, or even a corporate division from one business entity to another. This is an effective option for purchasing a manufacturing facility, a fleet of vehicles or even a portion of business that is no longer a good fit for the parent company but enhances your own business model. Asset purchases limit your liability, but they also may limit what you are able to purchase.
In a stock purchase you are usually buying the entire business (most often at least a controlling interest), including all of its outstanding debts and liabilities. This is especially important when the company has specific types of contracts that you wish to preserve, such as contracts with governmental agencies. There may be patents, trademarks, copyrighted materials or other intellectual property you wish to control, and this usually requires a stock purchase transaction. However, the buyer assumes all of the risk associated with the existing business including any present or future legal disputes, and contingent liabilities. There are protections we advise our clients to put into place, and these contracts must be carefully constructed and executed.
The Experienced Mergers and Acquisitions Attorneys at the Watkins Firm – 40+ Years Experience
Do you need an asset purchase or stock purchase? If you are considering a business acquisition in San Diego or Southern California or have questions regarding an asset purchase or stock purchase? You need the proven successful track record of the Watkins Firm Mergers and Acquisitions attorneys on your side of the transaction.
Ask about our proprietary, battle-tested contracts and due diligence checklists perfected over thousands and thousands of M & A transactions here in California and across the United States.
We invite you to review our podcast Episode 40 – Stock Purchase Transactions as well as the strong recommendations of former clients and contact the Watkins Firm or call us for a free and comprehensive consultation at 858-535-1511.
The Watkins Firm will contribute more than four decades of proven experience in thousands and thousands of these complex legal and financial transactions to provide sound counsel and legal guidance to help you to complete a successful acquisition and move your business objectives forward.
