Acquisitions, when implemented safely, prove a reliable way for businesses to expand their market share. An asset purchase often favours a buyer of a business as the buyer has the opportunity to acquire only those assets they want to acquire. Conversely, the buyer can negotiate to leave behind unwanted liabilities or assets not relevant to their business plan.
When acquiring a business or key assets of a business, the principle of ‘buyer beware’ applies. It is fundamental to ensure enquiries of the assets are made so that the buyer can be fully advised on what they are acquiring and whether any problems with the transfer could arise. For example a buyer will want to ensure there are no third party rights which can restrict the buyer’s ability to utilise the assets. AMD Solicitors highly experienced team of commercial solicitors in Bristol have the legal and business expertise you need to help you meet your business objectives while staying within the law.
There will be many competing interests in play during the acquisition or sale of a business and one of those will be whether to structure the deal as an asset purchase or a share purchase. The buyer and the seller will have differing views on the best way to structure the acquisition. For an asset purchase the key drivers will be the level of liability the buyer is prepared to take on, the tax positions of both parties and the relative bargaining strength of the buyer and seller.
A share purchase will normally favour a seller of a business as by selling the shares in the business, a buyer acquires the target company ‘lock stock and barrel’. The risk of the buyer in this structure is often offset by a more detailed acquisition agreement containing warranties and indemnities so that the buyer has contractual protection against liabilities that come to light after completion of the purchase.
Whether structured as an asset or share purchase, the buyer must ensure they seek as much information on the target business as possible before they buy and the seller must ensure their business is fit for sale. This means that all business contracts, assets, accounting information, property leases and employee information are up to date and easily presentable so that the due diligence process can be simplified.
An asset purchase agreement (APA) is the legal agreement between the buyer and seller in an asset purchase that lays out the main terms and conditions of the deal.
To reduce the time needed to negotiate the APA, it is important to ensure heads of agreement are made clear from the outset. The heads of terms are the headline terms which both parties agree to adhere to during the acquisition process.
In our experience, time can be one of the main reasons why a deal can fall through. At AMD we help our clients with negotiating heads of terms, whether acting for seller or buyer, as soon as they are in the market to buy or sell a business.
Please see our recent article on Buying a Business for more information
Our experienced team of corporate and commercial solicitors based in Bristol can advise you on the structuring of a deal from the outset. We have the legal expertise to guide you through an asset purchase or sale, whether you are buying or selling a business.
To find out more or to book an appointment call AMD today on 0117 9733989 and ask to speak to a member of our company and commercial law team. Alternatively, please feel free to email Grant McCall.
The prospect of owning your own business can be challenging but rewarding. One way to achieve business ownership is to buy an existing and established business. When purchasing a trading business, either as a share purchase or asset purchase, it is imperative that legal risks are known and mitigated.