An asset acquisition is the purchase of a juristic entity wherein specifically its assets instead of its securities are purchased. An asset acquisition usually entails anassumption of certain liabilities. The parties entering into a transaction can bargain over which assets will be acquired and which liabilities will be inherited, the transaction can be less complex in its structure and end result as opposed to a merger, securities purchase or a combination of both.
The use of an asset acquisition technique is a common feature when a purchaser aims to obtain control of assets owned by an insolvent company but are not interested in obtaining the entire entity including its business operations due to the state of affairs of the company’s finances. As opposed to acquiring the entire business of the entity, prospective buyers can choose which assets are attractive and proceed to purchase those assets. This approach is viewed as a cheaper alternative while providing later rewards in the future. The process usually involves obtaining control of significant assets that are important for operations of the entity. An advantage to the purchaser of the assets is that the opportunity to acquire the rest of the company, either by gaining a controlling interest through the purchase of securities or buying the entity outright can often be achieved with little effort.
By Alexander Agyei
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