Stock Purchase or Asset Purchase? Further Considerations
Optimist Legal is a team of lawyers made up from top international M&A corporate and finance law firms, in-house tech companies, as well as founders with exits ourselves.
We’ve handled M&A and finance transactions with a total deal value of over $100bn.
Our experience with M&A from the legal side is from all angles – we’ve worked as lawyers at the world’s top M&A law firms, we’ve helped facilitate acquisitions as in-house counsel at some of the world’s top companies, and we’ve also built and sold businesses ourselves.
A few days ago, I posted a breakdown of legal deal structuring – where I broke down the pro’s and con’s of Stock Purchase Agreements (SPA) vs. Asset Purchase Agreements (APA).
Building on my post from a few days ago, here are some additional considerations to keep in mind when choosing between an SPA or an APA:
(1) if you want to carry over existing employees and operations, you typically opt for a stock sale.
(2) When you want to minimize disruption to the acquired business to ensure optimal business continuity, such as when you are not rolling it up, you will typically do a stock sale, to avoid any changes to the current understanding and contact of company clients and vendors.
(3) asset sales are commonly chosen when you are evaluating the target based on the net value of its assets as opposed to its financial returns, such as when a business is near bankruptcy or being rolled into another business (eg. a heavy machinery company).
I hope you find this follow-up post valuable.
At our firm, we’re passionate about supporting acquisition entrepreneurs in their success. We’re here to build relationships and be a longstanding resource.
So we’d love feedback. What would you like to see us provide information about? What questions do you have?