Asset Purchase Agreement Vs Stock Purchase Agreement
Frequent due diligence problems that occurred only for the acquisition of assets include: the nature and status of the specific assets and ownership of those assets. Buyers can also benefit from preferential tax treatment when buying shares. The value can be tax-depreciated by the buyer for years. In states that impose sales or transfer taxes on the sale of assets, a share transaction can avoid some or all of these taxes. Stock sellers must record a profit or loss on the transaction for tax purposes, depending on the sale price of the stock and the seller`s base in the stock. In the event of a share sale, the buyer simply buys the stock of your business directly from each shareholder. The legal status of your company remains unchanged and the name of your company, your activities, your contracts, etc., remains unchanged unless otherwise stated in the sales contract. NetApp (NASDAQ: NTAP) announced today that there is a final agreement to purchase the engenio® external storage business of LSI Corporation (NYSE: LSI)… in a cash transaction for $480 million.
The following table shows the pros and cons of asset purchases over stock purchases. A merger consolidates two companies, which are different legal entities, into a single legal entity that holds the combined assets and liabilities of the original companies. With respect to the most common type of merger, a „reverse triangular merger,“ a buyer creates a 100% subsidiary (a „sub merger“). In conclusion, the shares of your company`s shareholders are cancelled against „the merger,“ usually in cash or shares issued by the purchaser. The merger merges into your business and ceases to exist as a stand-alone entity, and your business „survives“ – now as a wholly owned subsidiary of the buyer. Sellers often prefer share sales because all revenues are taxed with a lower rate of capital income and corporate tax is bypassed in C companies. Similarly, sellers are sometimes less responsible for future debts, such as product liability rights, contractual rights, employee lawsuits, pensions and benefit plans. However, the sales contract in a transaction can refer the responsibilities to a seller. Buyers may prefer to buy assets over buying shares because they offer flexibility to the buyer. The share purchase agreement generally contains the following important provisions: the parties; The sale agreement The counterparty; representations, guarantees and allowances, pre-pacts; The conditions that precede the closure; and restrictive alliances.