Weighing asset vs. equity deal structure
February 28, 2022
by a searcher from University of Southern California in San Diego, CA, USA
I am interested in what situations folks here would consider structuring a purchase as an equity acquisition? From what I understand, most acquisitions are asset based to reduce liability, but someone advised me there could be utility in using the equity structure to preserve existing biz dev relationships or contracts.
What, if any, situations could you imagine being reasonable for an equity buy out for a searcher in their acquisition to own/operate?
How about ways to deal with some of the tricky transactional details for contractual relationships if using an asset sale?
from Royal Melbourne Institute of Technology in Sydney NSW, Australia
beyond that, I find that the larger the transaction, the more often it is an equity sale. No one wants to redo employee and customer contracts. Suppliers etc also have your details in their systems. Frankly, it’s a pain.
in terms of liabilities, this is typically covered by thorough DD and warranties in the contract. Sometimes it is agreed to keep some funds in escrow until certain risks are covered off. This might go for 1-3 years.
Bottom line…a good lawyer will know how to protect you against unreasonable liabilities.
from University of Akron in Charlotte, NC, USA