Acquisitions

Companies acquire other businesses to extend a product line, to enhance a particular business function, to achieve economies of scale/cost savings, or to enhance financial performance. The basic acquisition structures are stock purchase, merger, and asset purchase. This chapter discusses the principal structuring parameters—tax and corporate law—that determine whether a stock purchase, merger, or asset purchase is the appropriate acquisition structure. Selective acquisitions of assets or selective assumptions of liabilities generally have to be accomplished by an asset purchase structure because in a stock purchase or in a merger, all assets and liabilities are conveyed, directly or indirectly, as a matter of law. The structure of acquisitions is dictated principally by tax considerations but also by considerations such as minimizing required approvals and providing a source of indemnification and escrows.