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What is an Asset Purchase?

Malcolm Tatum
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Updated: May 17, 2024
Views: 3,683
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An asset purchase is a strategy that involves the sale of one or more assets of a given company by another business enterprise. The range of assets may include equipment, facilities or even stocks or securities currently in the possession of the seller. When a merger or a buyout is taking place, it is not unusual for the buyer to make a series of these purchases during the course of the gradual acquisition, paying a set rate for each of the acquired assets.

The process of an asset purchase is relatively straightforward. The buyer and seller identify a specific asset or group of assets that will be involved in the purchase. For example, a business that wishes to discontinue its presence in a given state of province while continuing to operate in other areas may choose to sell all its real estate in that one location to a competitor. Along with the real estate, the asset purchase may also include specified pieces of equipment, certain raw materials and inventory, and possibly even some finished goods that the new owner believes can be used in some manner.

In order to make sure that the transaction of the asset purchase goes smoothly, the deal usually includes the preparation of a document known as an asset purchase agreement. The provisions of this sales contract helps to ensure that the seller receives payments in a timely manner, and the buyer receives the title to those assets according to the timetable specified in the contract. By preparing the agreement, both parties are aware of their responsibilities throughout the process of the sale, as well as what avenues of recourse are available in the event that a payment is delayed or the other party wishes to terminate the transaction.

In most cases, the asset purchase is designed to accomplish two things. For the seller, the goal is to acquire a specific amount of cash or cash assets as a result of the transaction. Typically, the idea is to make some sort of profit from the sale. At the same time, the buyer seeks to secure the assets in question for the best possible price, often with a specific plan to put the asset or assets to work immediately, making it possible to begin generating some sort of return for the investment made in acquiring those assets. In the best possible scenario, both the buyer and seller ultimately get what they desire from the asset purchase, and are free to move forward with their business goals.

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Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

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Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
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