Asset Sales

In most mergers and acquisitions, buyers choose between acquiring the target company’s assets or purchasing its stock. Each approach carries different implications for liability exposure, contract rights, tax treatment, and post-closing integration. Business owners and executives evaluating an acquisition should understand these distinctions before negotiating transaction terms.

Structure Law Group, LLP Los Angeles M&A attorneys advise buyers, sellers, founders, and investors on mergers and acquisitions throughout Los Angeles and California. The following overview examines key differences between asset purchases and stock purchases, including considerations that may influence risk allocation between the parties.

What Are the Differences Between an Asset Sale and a Stock Sale?

There are a variety of ways for a corporation to sell its assets without compromising its structural integrity or otherwise damaging the business. One common method by which California corporations can sell assets is a stock purchase agreement. For example, if an investor (which can even be a company) wants to buy stock in a company,

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the executing instrument is typically a stock purchase agreement. The stock purchase agreement allows a business to sell its assets – and sometimes, certain voting and management rights – without actually selling the business itself. In order to protect the assets at issue and protect the legal interests of the companies involved, a California corporate transactional attorney can help businesses effectively negotiate and execute stock purchase agreements.

What is a Stock Purchase Agreement?

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