In a merger or acquisition transaction, asset purchase agreements have a number of advantages and disadvantages in relation to the use of a share purchase agreement or a merger agreement. In the event of a share acquisition or merger, the buyer receives all the assets of the target, without exception, but also automatically assumes all the liabilities of the target. An asset acquisition contract not only allows a transaction that transfers only a portion of the assets (which is sometimes desired), but also allows the parties to negotiate what liabilities of the target are explicitly borne by the buyer and allows the buyer to leave behind liabilities that he does not want (or does not know). One of the drawbacks of an asset sale contract is that it can often result in more control changes. For example, contracts entered into by a target company and acquired by a buyer often require consideration in an asset contract, when it is less common for such consent to be required in the context of a share sale or merger agreement. The main advantage of an asset acquisition is that a buyer can choose the assets and liabilities he wants to acquire. The risk of hidden debt is generally lower than that of buying shares. This document is usually executed in the case of mergers and acquisitions when a company acquires either the assets and/or shares of the company, or when the buyer wishes to acquire the assets of a business in order to expand its own business. The transfer of businesses (employment protection) (TUPE) protects the rights of workers in the event of a transfer of assets from a company. The basic principle of TUPE is that when a seller buys the company`s assets as a “current business,” the employees of that company are automatically transferred to the buyer. On this basis, the buyer and seller must contact the relevant staff at an early stage. Purchasing assets allows buyers to divide the purchase price between the assets to reflect their market value.
This increases depreciation deductions that result in future tax savings. If the business is acquired “as a current business,” VAT can be ignored as long as both parties are registered. There will be a clause that fits into the agreement with VAT. A buyer will normally prefer to buy a company`s assets, while the seller prefers to sell the shares. The reason is that an investment purchase allows a buyer to choose exactly what assets they are buying and to identify precisely which liabilities they want to assume. It is important to determine exactly what is purchased. Assets transferred under an asset sale agreement may include: An asset purchase agreement (APA) is an agreement between a buyer and a seller that concludes the terms of the purchase and sale of a company`s assets.   It is important to note in an APA transaction that it is not necessary for the buyer to purchase all of the company`s assets.