Asset Purchase vs Stock Purchase

Difference Between Asset Purchase and Stock Purchase

In case of the asset purchase, the buyer purchases the specific assets and the specific liabilities of the company which it wants and there is no transfer of the business ownership, whereas, in case of the stock purchases, it is compulsory for the buyer to take all the assets and the liabilities of the seller company and there is full transfer of the business ownership.

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Asset Purchase vs Stock Purchase (wallstreetmojo.com)

Mergers and acquisition, which also refers to inorganic growth, is the buying and selling of companies that have their advantages. In any transaction of merger and acquisition, the owner and investors have a choice whether to do the transaction in an asset purchase or to purchase the common stocks of the company. The buyer of the asset, which is the acquirer, and the seller of the asset, which is the target, can have their reasons and explanations to opt for either one type of transaction or another.

Asset Purchase vs. Stock Purchase Infographics

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Asset Purchase vs Stock Purchase (wallstreetmojo.com)

Key Differences

Comparative Table

Asset Purchase MethodStock Purchase Method
No transfer of ownership of the businessFull transfer of ownership of the business
Businesses can claim tax benefits under this method.Businesses cannot claim tax benefits can this method.
Less complexity in the method can companies do not have to comply with the securities law business.A more complex method, as regulatory compliance is mandatory when buying a company.
Employee agreements with key employees may need to be re-negotiatedEmployee agreement need not be re-negotiated
The buyer has the right to choose the risks and the liabilities that he is ready to bearUnder this, the buyer needs to absorb all the risks and the liabilities of the business.
The ownership under this method is not lost and does not exchange hands.Under this method, the ownership is lost and exchanges hands.
Less prevalent in the marketMore prevalent in the market

Advantages of Stock Purchase

Advantages of Asset Purchase

Conclusion

In Asset Purchase vs. Stock Purchase, whether to go for an asset purchase transaction or a stock acquisition method depends on the company’s goals and objectives, and it also depends on the target company that one is acquiring. If the company has more liabilities than any good valuable assets, then it is better to go for a stock acquisition rather than going for an asset purchase. However, if the company has more liabilities, but the assets that the company has on its balance sheet are valuable for the buyer, then it is more advisable to go for an asset purchase. It will reap a benefit in the long-run of the company.

Businesses can also seek professional advisors like investment bankers or valuations experts who have many options for companies looking for inorganic growth in their industry or even looking to enter into a new industry altogether. Inorganic growth nowadays is the one which companies are looking for to expand their operations and reap benefits.

Recommended Articles

This article has been a guide to Asset Purchase vs. Stock Purchase. Here we discuss the top differences between an asset and stock purchase along with infographics and comparison table. You may also have a look at the following articles –

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *