Asset Purchase Agreements

An Asset Purchase Agreement, also known as a business purchase agreement, sets out the terms and conditions that relate to the purchase and/or sale of a company’s assets. Many times, a buyer will want to purchase only the assets of a company, as opposed to all the assets and liabilities they assume if they buy all the company’s shares. In this type of deal, the company sells the assets, as opposed to the individual shareholders, who are the sellers in a stock sale. This type of sale can be a delicate process because sellers may prefer to sell the company’s shares, whereas a buyer typically only wants to purchase the company’s assets. For this reason, it is crucial for a buyer to identify exactly what they are purchasing.

An asset purchase agreement can include the following

    • Goodwill
    • Furniture, fixtures & equipment
    • Real property
    • Contracts
    • Customer list
    • Inventory
    • Net working capital
    • Machinery

An asset agreement allows the buyer to cherry-pick exactly what assets they want to buy from a company; however, the transfer of each item must be completed in accordance with its proper rules. If you are embarking on an asset purchase, keep the following factors in mind.

inventory purchase

What Is an Asset Purchase Agreement?

Your DBG Advisors will be able to walk you through the entire asset purchase agreement process, but it is important to first have an understanding of the six most influential factors in your negotiations. The following details will affect the outcome of your agreement.

Factors to Consider

  • Price. Determining the sale price of a company, or any portion thereof is an intricate process that can be influenced by everything from financial history to the existence of multiple bidders. When an Asset Purchase Agreement is put in place, the price must be clearly laid out in the Agreement. It is also vital to ensure that the means by which it is going to be paid are clearly stated. Failure to do so may result in disagreements.
  • Assets. All of the specific details of the assets in question need to be clearly laid out in an Asset Purchase Agreement. Failure to do so may result in serious problems when finalizing the deal. All parties involved must be specific in explaining their conditions to the other. A skilled advisor will be able to help your company communicate clearly and be as descriptive as possible when making your considerations known to the other party. When there is real property involved in the negotiations, it is vital to specify the real property exactly as it is listed in records. In business purchases, all assets, including equipment must be made clear.
  • Involved parties. One of the first things that must be established and clearly stated in an Asset Purchase Agreement is the parties that are involved. They must be correctly identified, especially in corporate entities that include various related subdivisions that are independent of one another. It must be a priority to ensure that there is no confusion regarding involved parties.
  • Warranties and representation. These factors are the two things that the involved parties rely on as part of the Asset Purchase Agreement. They are typically included in a section that stands alone and explains the topics that relate to assurances of the legal status of the involved parties and the fitness of a product for its intended purpose.
  • Closing conditions. This factor in your Agreement is one that you want to be sure doesn’t get glanced over. The deal must specify exactly what must occur before the Agreement can be completed. This part of the Agreement will cover various requirements such as delivery of the assets and payment of the purchase price. An example of why this is a vital element is the possibility that an Agreement may only close after the seller has made repairs. If that is the case, it must be made clear in the Agreement.
  • Other essential information. Information in this section is sometimes referred to as “boilerplate language.” It addresses topics such as resolution of disputes that may arise during the transaction, how the Agreement may be modified when necessary, and which state’s laws will be used to govern the Asset Purchase Agreement.

DBG Advisors is a company you can rely on

We are seasoned advisors with years of experience in conducting business transactions in the Dallas/ Fort Worth market. We have knowledge of your industry, market, and your line of business. When we are helping to develop a defendable sales price, we will consider both financial and non-financial factors in the process. Whatever your reason is for needing to know how much your company is worth, we can help because we are experienced in conducting valuations.

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801 E Campbell Rd, #250L
Richardson, Texas 75081
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