M&A

Legal structures

A corporate acquisition can be structured legally as either an "asset purchase" in which the seller
sells business assets and liabilities to the buyer, an "equity purchase" in which the buyer purchases
equity interests in a target company from one or more selling shareholders or a "merger" in which
one legal entity is combined into another entity by operation of the corporate law statute(s) of the
jurisdiction of the merging entities.[9] In a transaction structured as a merger or equity purchase, the
buyer acquires all of the assets and liabilities of the acquired entity. In a transaction structured as an
asset purchase, the buyer and seller agree which assets and liabilities the buyer will acquire from the
seller.

Asset purchases are common in technology transactions where the buyer is most interested in
particular intellectual property rights but does not want to acquire liabilities or other contractual
relationships.[10] An asset purchase structure may also be used when the buyer wishes to buy a
particular division or unit of a company which is not a separate legal entity. There are numerous
challenges particular to this type of transaction, including isolating the specific assets and liabilities
that pertain to the unit, determining whether the unit utilizes services from other units of the selling
company, transferring employees, transferring permits and licenses, and ensuring that the seller
does not compete with the buyer in the same business area in the future.