The Difference Between A Share Purchase Agreement (SPA) And An Asset Purchase Agreement (APA)

Introduction

When two companies decide to merge their activity by the purchase of one company by the other, there are a number of ways they can take, when the two main ones are (1) purchase of shares of the target company (namely, the purchased company) (2) purchase of the activity and/or the assets of the target company (naturally, there are additional ways to perform the transaction by way of merger, which we will not refer to in this article).

Both ways set forth above, despite having a similar goal, are different in many aspects, when the main ones are the type of the agreement and the corporate actions required for the purpose of executing it.

In this article, we will review the two types of purchase transactions: purchasing shares and purchasing business activity/assets, the approvals which are required for each of these transactions as well as the considerations which may affect the selection of the type of transaction.