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What is an asset purchase agreement?

 

Louisiana business owners work hard to grow their companies and maintain profitability. Mergers and acquisitions are useful and popular options to achieve these goals, but these transactions come in many different forms. One such option is an asset purchase agreement.

Many of our readers may be asking, what exactly is an asset purchase agreement? Well, simply stated, it is an agreement for one company to purchase all or some of the assets owned by another company. It is not the wholesale purchase of the other company – just its assets.

The company that is selling the assets may be doing so for any number of reasons. The company could be switching gears and going into the production and sale of another type of product that no longer calls for the specific assets to be sold. Or, the company could be in the midst of a reorganization, perhaps to slim down operations and pay off debt. Whatever the reason, the companies will usually need to draft up an asset purchase agreement.

The asset purchase agreement itself will typically be a highly detailed document. The assets need to be properly valued, and the terms and means of acquiring the assets will need to be spelled out. As the asset purchase agreement is being hashed out, both the selling company and the buying company will need to do their due diligence to make sure that the transaction is right for them. Louisiana business owners who are contemplating a move like this will want to make sure that they have the right information in order to make the best decision.

Source: FindLaw, “Completing an Asset Sale,” Accessed July 10, 2016

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