Starting a company is a lot of work, and there are a lot of technicalities involved in order to make everything legal. Once the company is established, there are even more regulations that it will have to follow. This is also true regarding any kind of mergers and acquisitions. For that reason, this article identifies the 3 main structures that are used in the sale of businesses.
Asset Purchase
Asset Purchase is when the buyer purchases assets of a business from the seller. The buyer and seller must agree and state what each party will gain in their Asset Purchase Agreement. This structure is beneficial to the buyer, as they can decide what they want to purchase from the company, without assuming any liabilities. The only disadvantage to this structure is that there are a lot of contracts involved.
Stock Purchase
In a Stock Purchase, the buyer purchases all the equity in a company. In this transaction, the name of the company and the employees stay the same, but the ownership changes. Once the translation is complete, the seller will have no rights to the company. Stock Purchases have advantages and disadvantages. The advantage is that the process is simple and fast since the buyer can avoid transferring titles and contracts. The disadvantage, however, is that the buyer assumes all liabilities, both current and past, meaning the buyer can’t negotiate assets that they don’t want.
Merger
This is when two companies combine to form one. To make this possible, one company will buy another company’s assets or shares and then combine it with their company to make it one entity. In this transaction, all entities and liabilities are passed to the new company, which is a great benefit. The downside is that both companies can put the sale at risk.Before choosing which type of transaction that you want, make sure to speak with an exit strategies CT attorney. Your attorney will help you choose the right option for your specific needs.
