Legal Blog

M&A Nugget: The Stock Purchase Wins

Conventional thinking is that an asset purchase structure is more advantageous to a purchaser than a stock purchase.  If several factors exist, however, a stock purchase is more attractive. See below:

  1. If the seller has tax losses or other tax items that can be carried over and used in the future, a stock purchase would allow the purchaser to utilize those tax benefits;
  2. The seller may have key contracts, especially government contracts, that cannot be transferred in an asset purchase but that can be indirectly transferred to the purchaser in a stock purchase;
  3. Or, certain key contracts may require the consent of a third party to be transferred in an asset purchase, and the consents may be difficult to obtain; and
  4. Since a stock purchase allows the seller to enjoy a lower capital gains tax rate on the purchase price, and denies the purchaser many tax benefits of an asset purchase, there is an opportunity to negotiate a lower purchase price on a stock purchase.

If all of the above factors exist, then think stock purchase.

 

 

 

 

If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at gsolomon@offitkurman.com or 443-738-1522.

 

ABOUT GLENN D. SOLOMON

Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.

 

 

 

 

 

 

 

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 130 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our ten offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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