Mergers and Acquisitions or Asset Sale and Purchase
To some, there may be confusion between the definition of a merger and an acquisition. When a minimum of two companies are legally consolidated into a single corporation, this consolidation is a merger. An acquisition occurs when one company purchases another company. In large or publicly held corporations, mergers and acquisitions are the most efficient way to consolidate or purchase a company.
In the small and privately-held business context, most combinations or purchases of businesses occur through an asset sale and purchase. The surviving company does not want to step into the shoes of the selling company by purchasing the shares or other equity interests. Purchasing the shares or other equity brings all of the selling company’s liabilities to the purchaser with the shares or other equity. An asset sale and purchase requires a thorough analysis of many factors, including tax issues, payment, security, representations, warranties, escrow, and hold-backs.
Some of the many pertinent legal documents with which an attorney can assist are Letter of Intent, asset purchase agreement, closing transaction agreement, confidentiality agreements, non-competition agreements, employment agreements and consulting agreements.