What is the best strategy to acquire a business or purchase a competitor? Buying a business in San Diego is legally quite complex, and the experienced business advisers and attorneys at Allen Barron will guide you through the process. Mergers and acquisitions are structured to provide our clients with the greatest advantages and protection against liabilities. One of the first questions relates to the acquisition itself – will it be a stock purchase or an asset purchase? If you are interested in purchasing intellectual property such as trademarks or brands, or if the target acquisition holds government contracts the transaction is usually based upon a “stock purchase.” The buyer purchases all of the outstanding shares of the target business (or at least controlling interest). This form of acquisition passes every debt, asset and liability from the seller to the buyer, including any contingent liability that may have yet to arise. The key in these transactions is to protect our clients to ensure that contingent liabilities are resolved quickly.
An “asset purchase” allows a business person to purchase specific assets of a company without exposing themselves to the risk of specific forms of liability. The seller passes title to specific assets such as vehicles, a building and all machinery and inventory contained therein, or even a customer base or product line. The asset purchase limits the risk of the buyer to the specific asset to be acquired.
Another key to these transactions is an accurate “valuation.” How is a selling price established for a business? There are many options including a “multiplier” of annual sales or operating income, as well as expert appraisal. The valuation should include a “due diligence” process that ensures that our client’s have a comprehensive understanding of the transaction as a whole, as well as a solid review of any financial information or books for the asset to be acquired. Buying a business in San Diego can involve substantial risk, but a successful merger or acquisition can help your company to rapidly grow while increasing economies of scale and profitability.
If you are considering the purchase of a business asset or the acquisition of an entire business, we invite you to call for a free consultation at 866-631-3470.