What are the advantages of a San Diego stock purchase to complete a merger or acquisition? Why wouldn’t an asset purchase be the best strategy for any buyer? The simple answer is a stock purchase allows the buyer to “step into the shoes” of the seller, and assume control of their portion of the company or outright ownership of the business itself. Ownership transition may be invisible to customers and suppliers of the company, and in many cases the preservation of existing Goodwill and business relationships as well as government contracts or development projects may be best preserved with a stock purchase.
The risks of a stock purchase for the buyer are significant. The experienced mergers and acquisitions attorneys and tax professionals at Allen Barron work to protect our client’s interests in a stock purchase transaction. The primary obstacle centers on issues of liability. When you acquire a business through a stock purchase you assume all liabilities – existing, known or contingent – of the company you are taking over. These transactions require substantial due diligence, accounting insight as well as nuanced negotiations between the buyer and seller. Most sellers want all of their money up front, and to walk away from the transaction with no further obligations or exposure. This is simply not in the interest of almost all buyers.
How can leverage the advantages of a San Diego stock purchase and complete a profitable transaction? Most successful stock purchases require key players to remain in place, and to work through the transition. A time frame of six months to a year is quite common for the seller to remain engaged in the business as either a “consultant” or another active role. The job of the seller is to ensure all existing customers and business is maintained through the sale process, and new business development is continued to keep the company moving forward. This also allows time for unforeseen contingencies to present themselves, and for discrepancies in the books to become evident. The “final settlement” (months after the original closing) allows the buyer to protect themselves and deduct agreed upon expenses from part of the purchase price based upon the terms of the stock purchase agreement.
The advantages of a San Diego stock purchase can far outweigh the risks if you retain the services of Allen Barron. We will advise you in every aspect of your decision from operational business and due diligence to a close review of the books and financial statements. We will provide insight into the tax ramifications of the transaction and how to best position yourself for success throughout the transaction. If you are considering selling your business or acquiring an existing business or competitor we invite you to contact us for a free consultation at 866-631-3470.