Appleby looks at what to consider when buying or selling a business
When buying or selling a business, one of the key elements will be determining whether the deal should be structured as an asset sale or a share sale.
These are quite different transactions, having advantages and disadvantages when compared with one another as well as profound implications for both the buyer and the seller. The determination of which is the most appropriate transaction will often depend on what the seller and buyer are looking to achieve, bearing in mind the varied financial consequences and risk profile that the parties are willing to assume.
An asset sale is a transaction whereby the seller and the buyer agree on the sale and purchase of particular assets. The property being sold can be real (land) or personal (everything else), tangible (furniture, equipment, inventory, etc.) or intangible (brand name, goodwill, contracts, etc.) and existing property or future property (for example, in 1997 David Bowie sold off the future income stream attaching to anticipated royalty payments on his record sales).
The flexibility of the seller and buyer to choose which assets (and liabilities, if any) are the subject of the sale is one of the principal advantages of such a transaction. Asset sales offer a great deal of flexibility and such a transaction allows for plenty of room for tailoring…
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