Mergers and Acquisitions question

[Isaac987]

Hi, if in a case study there is a company (seller) that owns multiple businesses, and the client (buyer) is looking to acquire one business, would this be considered an asset and therefore an asset purchase? Thanks for any help.

 

[Bakers Junior Lawyer]

If it is an asset sale, the buyer company either:

1. Purchases the whole of the business as a going concern (= the business can trade after completion of the purchase just as it did prior to completion of the purchase; the buyer carries on business in succession to the seller).
2. When a company has separate and distinct trading divisions, it purchases one or more of these divisions as a going concern.

Plus:

• The selling company continues to exist after the sale.
• All individual assets concerned are transferred to the buyer together with the goodwill of the business.
• If it is sold, the whole of the business = a ‘cash shell’ is left with the seller and may be wound up (by the way of distribution on a solvent winding-up) or declare a dividend to extract cash.