Asset Purchase
A transaction where the buyer acquires specific assets and liabilities of a business rather than its shares.
Full Definition
An asset purchase is a type of acquisition where the buyer selects and purchases specific assets (and sometimes liabilities) from a company, rather than buying the company's shares. This gives the buyer flexibility to choose which parts of the business to acquire.
Common assets purchased include:
- Plant, machinery, and equipment
- Inventory and stock
- Intellectual property and goodwill
- Customer contracts and order books
- Property and leases
Advantages for buyers:
- Cherry-pick valuable assets, avoid unwanted liabilities
- Potential tax benefits through asset step-up
- No inherited corporate liabilities (generally)
- Cleaner transaction structure
Disadvantages:
- May require third-party consent for contract assignments
- TUPE regulations still apply to employees
- Stamp duty on property transfers
- More complex documentation
In the UK, asset purchases are common for smaller transactions and distressed sales.
Related Terms
Share Purchase Agreement (SPA)
The definitive legal contract governing the sale and purchase of shares in a company.
Acquisition
The purchase of one company by another, where the acquiring company takes control of the target business.
Goodwill
The intangible value of a business above its net asset value, representing reputation, customer relationships, and brand.
TUPE
Transfer of Undertakings regulations protecting employees' rights when a business or part of it transfers to a new owner.