Asset Purchases

AuthorChristopher Nicholls
Pages84-94
84
CHA PTER 3
ASSET PURCHASES
A. INTRODUC TION
This book deals prim arily with major share t ransactions. However, a
business acquisition can also be structured a s a purchase of the asset s
used in a busines s. A number of the basic legal considerations triggered
by asset purchase s will be canvas sed briefly in th is chapter.
B. PURCHASING ASSETS VS PURCHASING
HIDDEN OR CONTINGENT LIABILITIES
Why are some business acquisit ions structured as share t ransactions
and others as asset purch ases? That decision is a matter of negotiation
between the seller and the buyer and so w ill, in each case, ref lect deal-
specific considerations. As a m atter of received wisdom, it is often said
that, all else equal, purchasers of a busines s prefer to buy assets, while
sellers prefer to sell shares. This general “rule” must allow for so many
real-world exceptions that it hardly quali fies as a rule at all. The kernel
of truth embedded in this otherwise potentially misleading generaliz-
ation is that an asset sale enables the purchaser to identif y specifically
the business as sets they wish to purchase and to exclude the as sets they
do not need (and, importantly, do not wish to pay for). Perhaps most
important of all, when assets are being acquired, rather than shares

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