Assignment Question(s):
Q2: Differentiate between stock acquisition and assets acquisition? (1 mark)
Ans: Below are the key differences between stock acquisition and assets acquisition
Assets Acquisition
1 Def.: The buyer acquires or purchases the
specific assets of the seller company with
no transfer of the business / company’s
ownership.
2 The buyer can choose the liabilities which
he is willing to be liable for and are to be
shown in its balance sheet.
3 The buyer can get tax benefits as he can
amortize the goodwill acquired, over the
years.
4 Simple and easy method because
companies do not need to comply with the
securities & business laws.
5 Agreements with key employees of the
seller company may subject to re-
negotiation.
Stock Acquisition
Def.: The buyer purchases seller company
shares and hence acquires business
ownership of the seller company and takes all
the assets and the liabilities with it.
The buyer will have to be liable for all
liabilities of the business acquired in its
balance sheet.
The buyer can avoid liability for the payment
of transfer tax but cannot amortize the
goodwill acquired during stock acquisition.
A complex method because of the compliance
to many regulatory authorities and business
laws.
Agreements with key employees of the seller
company will not be required to re-negotiate.