Recently one of the topics that came up in discussion in the kong club was asset purchase versus share purchase when structuring a M&A deal
I wrote about this in detail in my Kong Edge newsletter (free to sign up) but here are the key points worth knowing if you're weighing up both options
SHARE PURCHASE
You buy the whole company
Contracts, employees, licences and trading history all carry on exactly as they were
Best for continuity and integration
The tradeoff is you inherit everything, known and unknown, so strong due diligence and a solid warranty and indemnity package are essential
Contracts usually transfer automatically because the legal entity holding them doesn’t often change, however contracts may contain a change of control clause, common in larger corporate and public sector agreements, which can require the other party to be notified or to give consent, so these always need checking during due diligence.
ASSET PURCHASE
You buy specific parts of the business, not the company itself
The trading history resets to zero and contracts often need consent to transfer (with a few caveats)
Best when the liability picture is uncertain, you only want part of the business, or the company has accumulated too much complexity
My default position is almost always share purchase
Continuity and trading history matter more to me than the marginal protection an asset deal offers
But i test that assumption hard through diligence on every deal
If something changes the risk picture i'll shift the structure or walk away entirely
This decision shapes the entire deal so put it on the table early
Has anyone favoured one or the other? Or any experiences to share that might benefit others?