M&A Transaction Structures

the objectives of the buyer and seller need to be in alignment for a transaction to close. Finding a proper deal structure is a critical component in promoting the feasibility of a merger or acquisition.

There are generally three options for structuring a merger or acquisition deal:

  1. Stock purchase
  2. Asset purchase
  3. Merger

Stock purchase

A stock purchase is much simpler than an asset purchase. The buyer simply purchases the stock of the selling company directly from shareholders in exchange for cash, the acquiring company’s stock. 

The corporate status of the target company remains unchanged except that the stock is now owned by the buyer. In this case, the acquirer acquires all of the assets and all of the liabilities of the target company, unless agreed otherwise by the buyer and seller.

Asset purchase

In an asset purchase, a buyer only buys selected assets from your company, and your company will continue to exist, and potentially continue to operate, following the sale. Relatedly, the buyer may not assume all of the liabilities of your company, which will remain with your company post-closing if not explicitly assumed.