There are three predominant ways of structuring a business acquisition: a stock purchase, an asset purchase, and a merger.
A stock purchase is the purchase of the company owning the business.
An asset purchase is the purchase of some or all of the assets of the business, but not the company owning the business.
A merger is a process whereby both companies statutorily cease to exist and combine into a new entity.
Whether you’re a buyer or a seller of a business, certain legal issues and competing interests must be addressed, such as:
- Transfer of important assets such as accounts, contracts, intellectual property, permits
- Limitation of assumed liability in the deal
- Obtaining internal and external approvals for the deal. Internal approvals may be director or manager consent and shareholder or member ratification. External approvals may be third party consent to assignments or change of control of contracts, licenses and permits
- taxation differs for the buyer and seller depending on whether the deal is structured as a stock purchase or an asset purchase
Understanding how these issues play out is important to negotiating favorable terms and structuring a successful acquisition or sale.