Business Financial Information Secrets

CHAPTER 16Business Acquisitions – The Basics

TYPES OF BUSINESS ACQUISITIONS

Chapter 15 covered two primary subjects: why businesses are valued and the basics of how business valuations are determined. One of the key whys of a business valuation has to do with the owners of a company looking to realize a liquidity event. This represents a quite common event, as in today's high‐intensity economy, more and more businesses are being formed, capitalized, built, and eventually positioned to be sold for a (hopefully) significant liquidity event, and in a relatively quick time period. For the purposes of this chapter, our discussion will be centered around more traditional business acquisitions from both the seller's and buyer's perspectives.

It is impossible to discuss all the attributes associated with a business acquisition, as documenting the legal issues alone would entail writing another book. So, to start this chapter, we focus on the two basic types of business acquisitions and offer some tax matters for consideration.

At a macro level, business acquisitions tend to come in one of two types:

1. Asset deals are generally structured around purchasing only the business assets of value (to the acquirer). In a number of cases, this may be all of the target company's assets and operations and in other cases, it may be that the acquirer is simply interested in just a portion of the target company. Under an asset deal, specific assets of a business are acquired, with the remaining legal ...