What is an asset purchase of a business?

Holmes & Hills corporate and commercial solicitors take a look at the stages of an asset purchase of a business.

An asset purchase involves the acquisition of some or all of the assets owned by a company or business. The assets bought are usually key to the continued operation of the business.

These assets may include tangible items such as property, machinery, inventory, stock, office equipment or vehicles. They could also include intangible assets such as intellectual property, goodwill, trade secrets, and licences.

The stages of an asset purchase of a business

1. First, the buyer of the assets will issue Heads of Terms to the seller, which will be reviewed and negotiated. These Heads of Terms will outline what assets the buyer wishes to purchase, what price he is willing to pay for these assets, and any other relevant terms or conditions of the purchase.
2. Next, the buyer will undertake legal due diligence on these assets. The due diligence process involves gathering information and investigating the business and its assets, which will provide the buyer with any information they need before making a contractual commitment to proceed with their purchase. The information usually requested during this process includes confirmation of the nature, conditions and title of all of the business assets, identification of any risks, issues or liabilities that may pass to the buyer once they purchase the business, and any other information that the buyer may wish to know about the business, including any contracts the business has entered into, or its financial information.
   
   The due diligence process is usually carried out for the buyer’s protection, and information gained during this process will usually help to form the basis of the seller’s warranties within the Asset Purchase Agreement, which is discussed in the next step.
3. The Asset Purchase Agreement is the main document required for transferring the assets of the business over to the buyer, and will contain all of the key terms agreed, including what assets are going to be transferred, the purchase price, and any other conditions included within the sale, including all warranties and indemnities requested from the seller for the buyer’s protection.
   
   Ancillaries may also be required, in order to officially transfer the relevant assets from the seller to the buyer. This may include land registry documents, any contracts required to assign intellectual property from the seller to the buyer and a novation of any contracts that the business has entered into in the seller’s name.
4. Once the above steps are negotiated and agreed, the documents will be completed, and post completion steps will be taken.

Holmes & Hills business solicitors can advise on all legal matters relating to asset purchases and can assist you throughout the whole process. If you require further information or advice in relation to this, please do not hesitate to get in touch with us.