As a potential seller, you must understand that price, while hugely important, is not the only important term you will need to negotiate with a potential buyer. Another hugely important issue is structure. You should understand that all business sales can be structured in one of five ways:
Each of these five methods of acquisition is illustrated in the following diagrams:
As can be seen by reviewing the charts, there are four methods to purchase the shares in a company, and one way to purchase the assets of a company.
The four share purchase methods include the three merger varieties plus the purchase of the shares of the target company from the target company shareholders. In contrast there is only one acquisition method by which the acquiring company purchases the assets of the target company shown in the above diagrams.
Therefore, the question presented to you, as seller (as well as any buyer) is whether the four share acquisition methods should be employed or whether the asset acquisition method should be employed to effectuate the sale of the company’s business. To learn how to go about considering how to answer this question, click here.
Additional contributing authors: Tom Petrides and Craig M. Carpenter.
Mr. Orlanski helps companies go public. He also represents companies seeking to find underwriters for an IPO or a follow on public offering or a PIPE financing, structures the terms of the public offering, and represents either the issuer or the underwriter in public stock offerings. He was named a Southern California "Super Lawyer" by…
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