From the course: Mergers & Acquisitions
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Define the deal structure
From the course: Mergers & Acquisitions
Define the deal structure
- Deal structure drives the price you'll pay for the acquisition, the assets you'll receive, and the liabilities you'll assume. Deals can either be asset deals or equity deals. With an asset deal, you're just buying the target's assets, but not assuming many of its liabilities. Asset sales reduce a buyer's risk of taking on unknown liabilities. One organization I worked for routinely bought businesses. The businesses we bought had customers, as well as facilities. We wanted to do those deals as asset deals, and the only asset we were willing to buy was the customers. We didn't want those facilities because there may have been huge, unknown, environmental liabilities that came along with those buildings. Asset deals allow clear purchase of specific assets. They're good for when you're buying just a portion of a business or don't want to assume the risks and liabilities. In an equity deal, you're acquiring the entire company as an entity. You get the assets and are responsible for any…
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