M&A 101: Back To Basics

Sellers and buyers in M&A transactions necessarily have conflicting interests and a natural desire to minimize their risks. These issues are among those that must be negotiated and resolved in most acquisitions of a private company target.

Transaction Structure

arly on, parties must decide whether to structure the deal as a merger, a stock sale or asset sale. That decision is usually driven by 1. tax considerations, 2. equity holder-approval requirements and 3. the desired risk allocation. Generally, an asset purchase may allow a buyer to cherry-pick assets and leave behind unwanted liabilities with the seller, but there remains the possibility of successor liability and a negotiated asset purchase agreement may leave seller holding more post-closing liability than an equity purchase agreement.