Buying or selling a closely held business, including the purchase of a division or a subsidiary, can be structured as (i) a statutory combination such as a statutory merger or share exchange, (ii) a negotiated purchase of outstanding stock from existing shareholders or (iii) a purchase of assets from the business.1 The transaction typically revolves around an agreement between the buyer and the selling entity, and sometimes its owners, setting forth the terms of the deal.
Purchases of assets are characterized by the acquisition by the buyer of specified assets from an entity, which may or may not represent all or substantially all of its assets, and the assumption by the buyer of specified liabilities of the seller, which typically do not represent all of the liabilities of the seller.2 When the parties choose to structure an acquisition as an asset purchase, there are unique drafting and negotiating issues regarding the specification of which assets and liabilities are transferred to the buyer, as well as the representations, closing conditions, indemnification and other provisions essential to memorializing the bargain reached by the parties. There are also statutory (e.g., bulk sales and fraudulent transfer statutes) and common law issues (e.g., de facto merger and other successor liability theories) unique to asset purchase transactions that could result in an asset purchaser being held liable for liabilities of the seller which it did not agree to assume.
These drafting and legal issues are dealt with from a United States (“U.S.”) law perspective in (1) the Model Asset Purchase Agreement with Commentary, which was published by the Mergers & Acquisitions Committee (formerly named the Negotiated Acquisitions Committee) (the “M&A Committee”) of the American Bar Association (“ABA”) in 2001 (the “Model Asset Purchase Agreement” or the “Model Agreement”); (2) the Revised Model Stock Purchase Agreement with Commentary, which was published by the M&A Committee in 2010 (the “Model Stock Purchase Agreement” or the “RMSPA”); and (3) the Model Merger Agreement for the Acquisition of a Public Company, which was published by the M&A Committee in 2011 (the “Model Public Company Merger Agreement”). In recognition of how mergers and acquisitions (“M&A”) have become increasingly global, the Model Asset Purchase Agreement was accompanied by a separate M&A Committee volume in 2001 entitled International Asset Acquisitions, which included summaries of the laws of 33 other countries relevant to asset acquisitions, and in 2007 was followed by another M&A Committee book, which was entitled International Mergers and Acquisitions Due Diligence and surveyed relevant laws from 39 countries...
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