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An asset purchase agreement (APA) is an agreement between a buyer and a seller that finalizes terms and conditions related to the purchase and sale of a company's assets. [1] [2] It is important to note in an APA transaction, it is not necessary for the buyer to purchase all of the assets of the company. In fact, it is common for a buyer to ...
After due diligence is complete, the parties may proceed to draw up a definitive agreement, known as a "merger agreement", "share purchase agreement," or "asset purchase agreement" depending on the structure of the transaction. Such contracts are typically 80 to 100 pages long and focus on five key types of terms: [16]
The entity disposing, conveying, and selling the assets is referred to as the seller or vendor. [3] A PSA sets out the various rights and obligations of both the buyer and seller, and might also require other documents be executed and recorded in the public records, such as an assignment, deed of trust , or farmout agreement .
There is also uncertainty regarding which minority shareholders will participate in the sale, which could also have an impact on the final purchase price. [6] The fact that tag-along rights requires tagging shareholders to sell shares "under the same terms and conditions" as the majority shareholders can also be a double-edged sword.
Buy–sell agreement can be in the form of a cross-purchase plan or a repurchase (entity or stock-redemption) plan. For greater neutrality and effectiveness of the buy–sell arrangement, the service of a corporate trustee is recommended. Profit or loss from a buy-sell agreement may trigger tax conquencess and taxable income. [2]
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