The Purchaser acquires all or part of the assets of the target Company for a pre-agreed price.
With this scheme of M&A transaction structuring, the Purchaser acquires only those assets and assumes only those liabilities of the target Company which they need. From a legal point of view, the target Company continues to exist, but with a different set of assets and liabilities.
Benefits of the Asset Purchase scheme
Unknown or undisclosed liabilities are not transferred to the Purchaser
The Purchaser does not need to fulfill potentially disadvantageous contracts with trade unions and workers
It is more flexible in terms of the accounting of the assets acquired and liabilities
Drawbacks of the Asset Purchase scheme
Goodwill of the acquired company loses its value
The acquired company changes its corporate structure and operating business, which could have a negative effect
Unprofitable contracts, labor agreements and other legal documents signed prior to acquisition cannot always be cancelled
Licenses and permits owned by the acquired company are not always retained by the Purchaser
The Purchaser may lose the right for tax assets (for example, the transfer of losses from previous years)
There may be problems with the tax law which are possible in the sale/purchase of real assets