Asset vs. Stock Purchase for a Commercial General Contractor Business

May 30, 2025

by a searcher in Washington, DC, USA

I am at the LOI stage for the acquisition of a large commercial contractor with many municipal and state projects and need to have crisp answers on whether to propose an asset vs. stock sale. The owner would be rolling ~20% into the new deals. This Company has bonding requirements with its customers. Is it realistic to request an asset sale given the various licensing, bonding and contract transfer requirements or is there a feasible buyer tax advantageous path with proper indemnities in a stock / membership interest sale. Would welcome feedback and experiences on the issue. Thanks!

Reply by a professional
from Northwestern University in Kansas City, MO, USA

Please be advised that you have to be extremely cautious around the working capital component of these deals to not lose your bonding capacity or scare the surety off. We work with a number of M&A groups that have gotten into a pickle and had to encounter personal guarantees and others to maintain bonding after the deal has already been structured and if doing government work bonding will be required on all deals.

Reply by a searcher
from Columbia University in New York, NY, USA

Ask your counsel about the possibility of an F-reorganization structure if you want to preserve some of the benefits of an asset sale but need to do a stock sale for the reasons you (and others) have stated.

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