An asset sale involves selling individual assets of a business such as property, equipment, stock, contracts, or goodwill rather than the company itself (which is usually via a share sale). This approach allows buyers to “pick and choose” what they want to acquire, and sellers can retain certain assets or limit liability. Asset sales are common in business acquisitions, restructurings, or when the company has significant liabilities.
Key Steps in an Asset Sale
- Negotiation & Heads of Terms – The outline commercial terms are agreed, including which assets are being sold and the purchase price. The key terms are then recorded in a non-binding heads of agreement (save perhaps for an agreement on exclusivity).
- Due Diligence – The next steps involved the buyer carrying out due diligence on the assets being acquired. The purchasers solicitors typically reports on the results of its due diligence enquiries which influences whether a purchaser wishes to proceed with the transaction and/or whether it needs to renegotiate the terms.
- Asset Sale Agreement (ASA) – An ASA is typically entered into. This is a legally binding agreement outlining the assets being acquired and the terms upon which they are being acquired. Certain warranties and indemnities may need to be provided for. If there is a property, it will be the subject of a separate contract for sale in the ordinary way. The ASA usually provides that the acquisition of the business assets is contingent on the acquisition of the property. Completion arrangements will also be clearly set out in the ASA.
- Completion Deliverables – The transfer of assets, assignment of contracts, assignment of IP, assignment of goodwill, transfer of licences and the delivery of stock and other items all form part of the completion deliverables.
- Completion & Post-Completion Steps – Payment is made, asset ownership is transferred, and all completion requirements are met. Post-completion registrations are carried out, stamp duty is paid and any other post-completion items are then tidied up.
Professional legal and tax advice is essential to ensure a smooth asset sale process. The sooner that this is obtained, the better.
For more information please contact James Tansey or Niamh Gibney.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
