Mergers and acquisitions are not always as simple as they seem. Even though both parties agree to complete the deal, they still have to ensure their interests are protected once the sale is completed. If you’re planning on selling or merging with another company, you might want to take a refresher on various mergers and acquisitions. We’ll talk about the three most common structures used in these transactions.
An asset purchase is a type of transaction that involves buying the assets of a company that another company owns. The buying company then uses this acquisition to acquire the company’s tangible and intangible assets. Usually, asset purchases are used by companies when they only want to receive a single business unit.
The buyer commonly prefers this type of transaction due to the freedom it gives the acquiring company to decide what assets and liabilities it wants to own. However, this deal can also be very time-consuming and challenging to complete. One of the most significant disadvantages of asset purchases is that it can take a long time to identify and transfer all of the company’s assets.
Instead of selling all of the company’s assets, many mergers and acquisitions are carried out by selling the target company’s stock. Once the buyer has most of the store, it can take ownership of the company. One of the main advantages of the stock purchase process is that it’s easier to complete than the asset purchase. Since the target company’s assets are only being transferred to the buyer, there’s no need for third-party consent and procedures for assignment.
Unfortunately, stock purchases can cause problems for the buyer and the company’s shareholders. The deal can be delayed or even stopped if the target company’s shareholders do not agree to sell their shares to the buyer. To avoid this, the buyer usually requires that most of the company’s shareholders approve the deal.
Mergers differ from other types of transactions in that they involve two companies coming together to form a new legal entity. The new company then takes over the assets, rights, and liabilities of the entity that no longer exists. Once the deal is completed, the target company’s stockholders can receive either cash or stock from the buyer.
Triangular or reverse triangular mergers are commonly performed. Triangular mergers usually involve the buyer using a subsidiary of the target company to complete the deal. On the other hand, in reverse triangular mergers, the buyer’s subsidiary becomes the target company.
Mergers are generally beneficial because they involve taking over the entire assets and liabilities of the target company. One of the most significant advantages of this type of transaction is that most of the target company’s shareholders are required to approve it.
Originally published at ViperEquityPartners.net